Is the Worst Over with Mortgage Rates?

Dated: December 19 2022

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The Federal Reserve raised interest rates this week, but that doesn’t mean mortgage rates are going up.

During their December meeting, the Fed hiked its benchmark short-term interest rate, the federal funds rate, by 50 basis points. This comes after the Consumer Price Index was up 7.1% year-over-year in November, a softer than expected number.

“From a mortgage perspective, rates have actually gone down even though the Fed has raised rates. We would expect the worst is over. We think you’re going to see lower rates into the next year despite further rate hikes,” says JR Gondeck, partner and managing director with the Lerner Group, a financial advisory firm.

Experts say the next moves for mortgage interest rates depend more on the tone of the Fed’s projections for 2023, which signaled additional rate hikes to come in the year.

Ahead of the Fed’s December meeting, mortgage interest rates receded week-over-week. The average for a 30-year fixed-rate mortgage is now back down to 6.51%, according to a survey by Bankrate, which like NextAdvisor is owned by Red Ventures.

“I think a lot of the Fed’s actions have already been baked into mortgage rates. With that said, if the Fed takes a more hawkish tone than market’s anticipate, we could see some upward movement in mortgage rates,” says Odeta Kushi, deputy chief economist at First American Financial Corporation.

Amid their ongoing bid to tame inflation, housing costs, which make up a significant portion of consumer spending, are an important metric for the Fed.

Chairman Powell said, in a recent speech, “We are seeing the effects on demand in the most interest rate sensitive sectors of the economy, such as housing. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation.”

This Week’s Mortgage Rates

Mortgage rates continued their decline this week, with the average rate for a 30-year fixed-rate loan dropping to 6.51% in a survey by Bankrate, which like NextAdvisor is owned by Red Ventures. The 30-year average ticked down just a hair in a similar survey by the government-sponsored entity Freddie Mac, to 6.31%.

Here are the weekly averages for several loans as of Dec. 14, according to Bankrate:

LOAN TYPETHIS WEEK’S RATELAST WEEK’S RATECHANGE
30-year fixed6.51%6.62%– 0.11
15-year fixed5.68%5.81%– 0.13
5/1 adjustable5.43%5.46%– 0.03

After years of low rates, averages earlier this fall hit levels not seen in two decades, as this chart of monthly averages according to Freddie Mac shows:

Mortgages Rates History as of November 1, 202230yr Fixed15yr Fixed5/1 ARMhttps://time.com/nextadvisor/mortgages/mortgage-news/mortgage-rates-fed-meeting-december-15/#_ABSTRACT_RENDERER_ID_1)"> x="133" y="323" width="526" height="1" stroke="none" stroke-width="0" fill="#cccccc">1-20005-20019-20021-20045-20059-20061-20085-20099-20101-20125-20139-20141-20165-20179-20181-20205-20219-20220246810Source: Freddie MacRate (%)
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Joyce Aponte

As a Realtor for 37 years, I have specialized in all aspects of the Real Estate business. First time homebuyers, investors, homeowners upgrading, 2nd homes, shore homes and more!!  I have a speci....

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1-20008.217.8
2-20008.337.93
3-20008.247.83
4-20008.157.8
5-20008.528.18
6-20008.297.99
7-20008.157.87
8-20008.0287.763
9-20007.917.6
10-20007.87.47
11-20007.757.42
12-20007.387.06
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8-20016.956.5
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