The 30-year average fixed rate fell from 5.30% to 4.99% during the seven days ending in August. When investors are worried about inflation, they lose interest in buying bonds because the return on their investment is lower when inflation is high. Inflation erodes the value of future bond payments. Lower demand causes bond prices to fall and yields to rise.
Since mortgage rates tend to follow the same path as the 10-year Treasury yield, they also increase. Mortgage interest rates also depend on lenders analyzing your personal finances and other personal factors, such as the amount you plan to borrow, payment term, employment status and income, debt-to-income ratio, and credit score. In its most recent rate hike, at the end of July, the central bank raised the benchmark rate by 75 basis points. Freddie Mac, the federally licensed mortgage investor, adds the rates of about 80 lenders across the country to get weekly national averages.
If conditions are hectic and interest rates are likely to stay at least the same, if they don't rise, it may be wise to set a rate that fits your budget and feels fair to you. Many borrowers receive a mortgage rate quote and settle it instead of getting multiple quotes from multiple lenders. While the Fed's second consecutive interest rate hike of three-quarters of a percentage point seems to lead to a rebound in mortgage rates, concerns about a recession have stalled increases for now. The tug-of-war dynamic created by opposing forces in the bond market can cause some weekly volatility in mortgage rates.
When interest rates rise, reflecting changes in the economy and financial markets, so do mortgage rates and vice versa. As inflation increases, the Fed reacts by applying a more aggressive monetary policy, which invariably leads to higher mortgage rates. Experts from Fannie Mae, First American, and other industry leaders are divided on whether 30-year mortgage rates will continue to rise in August or stabilize. It's important to note that, even if rates exceed 5%, they are still on par with or better than the rates available in the past two decades.
Mortgage rates saw the biggest weekly jump since 1987, at 55 basis points (0.55%) the day after the Federal Reserve's June hike. If rising interest rates this year discouraged you from buying a home, an adjustable-rate mortgage (ARM) could be more financially accommodative. Black Knight defines borrowers eligible for refinancing as having a minimum credit score of 720, 20% equity in their home, and the ability to reduce at least 0.75% of their interest rate by refinancing on a 30-year fixed mortgage. The Mortgage Bankers Association and the National Association of Realtors are at the lower end of the group, estimating that the 30-year average fixed interest rate will settle at 5.2% by the end of the third quarter.