A hotter-than-expected inflation report has pushed back expectations for a Federal Reserve interest rate cut, indicating that mortgage rates are likely to remain elevated for a longer period than previously anticipated. In March, 30-year mortgage rates averaged 6.47%, according to Zillow data, with a trend towards further increases this month. The Consumer Price Index rose to 3.5% in March, exceeding forecasts and leading investors to adjust their expectations for a Fed rate cut, now not expected until September at the earliest.
Lawrence Yun, chief economist for the National Association of Realtors, predicts mortgage rates could surpass 7% in the upcoming weeks due to the recent inflation figures. While many forecasts anticipated a decline in rates this year, the data has been somewhat stagnant, delaying the expected decrease. Homeowners seeking financing options amidst high rates may consider a home equity line of credit (HELOC) to leverage their home's value for significant purchases.
HELOC rates are currently favorable compared to other loan options, offering flexibility in borrowing against home equity without refinancing the entire mortgage. Despite expectations of a rise in home prices, the current market conditions, including low housing supply and easing mortgage rates, may contribute to price stability. However, experts caution that house prices typically drop during recessions, driven by decreased affordability and demand.
Prospective buyers are advised to use a mortgage calculator to determine affordability based on income and expenses, ensuring that housing costs do not exceed 28% of gross monthly income. Shopping around for the best mortgage rate and obtaining preapproval from multiple lenders is recommended to secure a loan within budget constraints. As the market evolves, staying informed about interest rate trends and housing market dynamics is crucial for making informed decisions on home purchases.
