Inflation Fears Subside, Mortgage Rates Up Only Slightly This Week
Fears regarding the Federal Reserve’s next rate moves subsided a bit this week, and Florida home loan rates inched only slightly higher as a result.
A report released by Freddie Mac yesterday showed rates on 30-year, fixed-rate mortgages (the most common financing option, and the industry benchmark) increasing to an average of 6.79 percent, up from 6.78 percent last week. It was the fourth consecutive weekly increase, leaving rates higher than they have been since May 24, 2002, when a 6.81 average was posted.
The Florida housing market and the overall U.S. housing sector, both of which have set records for the better part of this decade, are showing clear signs of cooling. The U.S. market is expected to drop by 7 percent this year in terms of home sales, as higher home loan rates and shocking price tags make home ownership harder.
Last week, the Fed raised interest rates for the 17th consecutive time, but in explaining the action, noted future changes would be driven by incoming economic data. That eased worries among financial markets that the central bank could step up its crusade against inflation even more dramatically and raise the risks of a recession.
Frank Nothaft, Freddie Mac’s chief economist, is not worried that dramatic changes are on the horizon. He predicts that we will see only a gradual increase in the rates of Florida home loans this year, so long as the Fed does not become overly worried about inflation.
“The interest rate for the 30-year fixed-rate mortgage will gradually drift upward, but should remain under 7 percent for the year,” Nothaft said.
Other types o
f mortgages also increased in cost this week, according to Freddie Mac. Rates on 15-year, fixed-rate loans, a popular choice for refinancing a Florida home loan, increased to 6.44 percent, also a 0.01 percent increase from last week. One-year adjustable-rate mortgages crept up to 5.83 percent, up from 5.82 percent last week and hitting highest level in more than five years.
The mortgage rates above do not include points. Both 30-year and 15-year mortgages carried a national average of 0.5 points last week, while the five-year ARM had averaged 0.6 points and one-year ARMs carried 0.8 points.
