Mortgage and Refinance Rates Drop "Is the Fed Done Fighting Inflation?"

Mortgage Rates Decline: Opportunity for Homebuyers and Refinancers

Good news for prospective homebuyers and homeowners looking to refinance, as average mortgage rates have seen a decline across the board this week, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs, and jumbo loans have all experienced drops, presenting an opportune moment for those seeking affordable financing options.

After a year and a half of continuous interest rate hikes in 2022 and 2023, the Federal Reserve has finally decided to put a hold on increasing rates at its recent meeting on June 14. However, housing analysts remain divided on interpreting this decision. The key question remains: is the Fed done fighting inflation, or is this pause merely temporary?

Chief economist at Bright MLS, Lisa Sturtevant, believes the Fed's goal of achieving a 2 percent inflation target means rate increases are likely to resume in the future. Sturtevant asserts, "It is extremely unlikely that the Fed will back down from that goal, since they have been out so forcefully and consistently with the intent to reach that milestone." As a result, she warns of the potential for the economy to head into a mild recession, either later this year or at the beginning of the next, once rate increases resume.

Here are the latest average mortgage rates:

- 30-year fixed: 7.15% (-0.17 from the previous week)

- 15-year fixed: 6.46% (-0.11 from the previous week)

- 5/1 ARM: 6.24% (-0.01 from the previous week)

- 30-year fixed jumbo: 7.18% (-0.14 from the previous week)

Please note that these rates are averages and actual rates may vary. The data presented here is accurate as of Wednesday, July 19th, 2023, at 7:30 a.m.

For potential homebuyers and those considering refinancing, getting multiple mortgage offers from different lenders is highly recommended. A study by Freddie Mac found that comparing offers from multiple lenders can lead to significant savings over the life of the mortgage. The effort put into bargain-hunting for the best deal can pay off tremendously, especially during periods of interest rate fluctuations.

Mark Hamrick, senior economic analyst for Bankrate, emphasizes the importance of shopping around, stating, "Seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?"

For those specifically considering a 30-year fixed-rate mortgage, the decline of 17 basis points from the previous week to 7.15 percent presents an opportunity to save on monthly payments. At the current average rate, borrowers would pay $675.41 per month in principal and interest for every $100,000 borrowed. This represents a reduction of $11.52 from the previous week's costs.

While the 30-year mortgage is a popular choice, it's essential to consider the potential downsides, such as paying more total interest over the extended repayment period, facing higher interest rates compared to shorter-term loans, and slower equity growth in the early years.

Prospective buyers are advised to use Bankrate's home affordability calculator to determine the most suitable mortgage term for their financial goals and avoid stretching their budget to the breaking point.

Overall, with mortgage rates currently down, now may be an ideal time for homebuyers and homeowners to explore their options and secure favorable financing terms. However, staying informed about the Federal Reserve's future decisions is crucial, as they may resume rate increases depending on the economic landscape.