Projected Rise of Mortgage Rates May Trigger 8% Surge
The possible rise of mortgage rates to 1% (Photo: Realty Times)
Economists Predict Potential Rise of Mortgage Rates to 8% as Market Hovers Above 7% Average
NewsNation — The rise of mortgage rates continues as current 30-year-fixed rates exceed 7%, sparking economists’ warnings of a potential climb to 8%. Bankrate’s report indicates a rate of 7.58%, marking an 18-basis point increase from last week. Correspondingly, Freddie Mac’s data notes a rate of 7.09% as of August 17 — the highest in over two decades.
Experts highlighted by MarketWatch underline the possibility of an 8% mortgage if the economy maintains its strength and the Federal Reserve enacts interest rate hikes. Freddie Mac attributes these rate increases to the economy’s consistent outperformance and a notable rise in the 10-year Treasury yield.
Experts, including Lawrence Yun, Chief Economist at the National Association of Realtors, stress the importance of monitoring the rise of mortgage rates, terming it a “critical stage.” Cris deRitis, Deputy Chief Economist at Moody’s Analytics, warns that we could witness significant mortgage rate hikes if global investors seek higher yields for fixed-income assets, as per MarketWatch. This scenario could contribute to the rise of mortgage rates. The current wide gap of 300 basis points between the 30-year fixed mortgage rate and the 10-year Treasury bond, noted by deRitis, is highly unusual and historically linked to financial crises, which further emphasizes the potential rise of mortgage rates. Investopedia explains Treasury bond yields as indicators of the U.S. government’s annual interest rate on debt obligations, aiding in gauging economic prospects.
These indicators play a role in shaping the trajectory of the rise of mortgage rates. DeRitis suggests that if this spread widens as interest rates continue to rise, an 8% mortgage rate could become a reality. This aligns with a New York Federal Reserve survey where households anticipate the rise of mortgage rates, projecting them to reach 8.4% within a year. Yun, as featured in the Wall Street Journal, envisions a fall in rates to 6% if the Federal Reserve considers inflation “contained.” However, he also notes that rate hikes could solidify the path toward the projected 8% mortgage rate, reflecting concerns about the potential rise.
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Significant Impact: A 1% Rise in Mortgage Rates Can Make a Big Difference
NewsNation – With the current mortgage rate hovering around 7%, a shift to 8% represents a modest yet impactful change. According to Rocket Mortgage, reduced mortgage rates lead to lesser monthly payments and more substantial monthly savings. Therefore, securing the most favorable rate is highly advisable.
Although a mere one-percentage-point elevation in the mortgage rate might appear to yield a marginal rise in monthly payments, it’s crucial to recognize that this incremental change can accumulate into a significant sum over time,” the report highlights.
Rocket Mortgage underscores that over a 30-year loan duration, even a 1% uptick in mortgage rates could amass tens of thousands of dollars in additional costs.
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