U.S. mortgage rates ticked down this week, ending a five-week stretch of increases, but remained above 7% amid lingering inflation.
7.23% the week before,"Recent volatility makes it difficult to forecast where rates will go next, but we should have a better gauge in September as the Federal Reserve determines their next steps regarding interest rate hikes," said Sam Khater, Freddie Mac's chief economist.
Mortgage rates have spiked during the Fed's historic inflation-curbing campaign, sending home affordability to its lowest level in nearly four decades. Buying a home is more expensive because of the added cost of financing the mortgage and rising home prices.because there are a historically low number of homes on the market to buy. Homeowners who previously locked in lower rates are reluctant to sell now that rates have surged.
The combination of low inventory and high costs has squeezed would-be homebuyers and sent home sales lower than last year.Inflation remains well above the Fed's 2% target, which has kept interest rates elevated. The bond market is concerned that taming inflation may require more rate hikes by the Federal Reserve. The central bank has three remaining meetings this year.
Fed Chair Jerome Powell has emphasized the significance of July's core Personal Consumption Expenditures, PCE, price index for the Fed's future path. But the highly anticipated PCE index, released Thursday, indicated that year-over-year inflation remained high in July at 3.3%. While inflation is high, the moderate 0.2% monthly gain is more consistent with where the Fed would like to see inflation.While the Fed does not set the interest rates that borrowers pay on mortgages directly, its actions influence them. Mortgage rates tend to track the yield on 10-year U.S.
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