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Mortgage Rates Remain Elevated Amid Renewed Inflation Concerns

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Mortgage Rates Remain Elevated Amid Renewed Inflation Concerns

This week’s survey on 30-year fixed mortgages revealed an average total of 0.26 discount and origination points. Discount points serve as a method to lower your mortgage rate, whereas origination points represent fees charged by lenders for loan creation, review, and processing.

As of April 17, the monthly mortgage payment stands at $2,160. This figure is based on today’s rates and reflects the financial landscape for mortgage holders.

When considering the national median family income for 2023, which was $96,300 as reported by the U.S. Department of Housing and Urban Development, and the median price of an existing home sold in March 2024, which was $393,500 according to the National Association of Realtors (NAR), a significant portion of the typical family’s income—27 percent to be exact—is allocated towards the monthly mortgage payment. This is calculated based on a 20 percent down payment and a 7.31 percent mortgage rate.

Looking ahead, there is uncertainty about whether mortgage rates will decrease. The likelihood of a decline in mortgage rates seems to be diminishing due to factors such as a robust U.S. economy and persistent inflation concerns.

Lawrence Yun, chief economist at the National Association of Realtors, notes that March’s inflation figures were alarming, which does not bode well for interest rates. The recent inflation rate of 3.5 percent, as reported by the U.S. Labor Department, indicates that a rate cut by the Federal Reserve is unlikely in the near future. This stance was reinforced by the Fed’s decision to keep rates unchanged in March, especially in light of ongoing challenges in curbing inflation.

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Melissa Cohn, regional vice president of William Raveis Mortgage, suggests that a rate cut may not materialize until next year, given the economic indicators. However, there is hope that interest rates might decrease in the coming year or two, marking a positive turn in the rate cycle.

ALSO READ: Bank Rate Cut Hopes Fade: HSBC, Barclays, NatWest Raise Mortgage Rates

It’s essential to clarify that mortgage rates are influenced by investor sentiment, particularly regarding 10-year Treasury bonds, which act as a leading indicator for fixed mortgage prices. This dynamic can result in significant rate fluctuations, rising with news of Fed hikes and dropping in anticipation of rate cuts.

Additionally, mortgage rates are intertwined with inflation, a metric that the Fed is actively working to manage. While some Fed members anticipate three rate cuts this year, there are differing opinions, with one regional Fed president predicting only one rate cut in 2024.

Recent data from the Mortgage Bankers Association shows a 2.7 percent decline in loan applications this week, alongside continued elevated home prices. Joel Kan, the group’s deputy chief economist, attributes this decline to affordability challenges and limited housing supply, which have prompted homebuyers to delay their purchase decisions.

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While there has been a slight increase in inventory in March, as reported by NAR, many markets still grapple with insufficient listings, highlighting ongoing challenges in the real estate sector.

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