Some pros say it’s likely mortgage rates may keep rising

Since the start of the year, mortgage rates have been trending upwards — and according to many experts, this trend will likely continue through October. So far this year, mortgage rates have climbed from about 3% to nearly 7%, the highest level since 2007, MarketWatch recently reported. And those rate increases could continue: “Until inflation shows a material moderation, the risk is for further increases in mortgage rates,” says Greg McBride, chief financial analyst at Bankrate.  See the best mortgage rates you may get here.

Echoing that sentiment, Kate Wood, home expert at NerdWallet, says interest rates for 30-year fixed-rate loans appear to be staying over 6% and products like the 15-year fixed and the 5-year ARMs are averaging over 5%. “Though the Federal Reserve’s latest rate increase wasn’t as dramatic as some expected, that hike plus the two more that will likely occur this year will probably keep mortgage rates elevated,” says Wood.

Following the recent Federal Reserve meeting where Chair Jerome Powell made it clear that fighting inflation is the central bank’s first priority, the updated projections from members of the Fed’s rate-setting committee show that they expect short-term rates to continue to both climb higher and remain so for longer than previously expected, says Realtor.com chief economist Danielle Hale.

“This will put upward pressure on mortgage rates that could be offset by weaker economic growth, which is also anticipated. For now, it’s smart for buyers to prepare for the possibility of higher mortgage rates, especially when considering their home shopping budget,” says Hale. Shoppers can rate-test their budgets by trying out the impact of higher rates on their scenarios by using a mortgage calculator.

See the best mortgage rates you may get here.

Though Hale points out that there aren’t any Fed meetings in October, she says Fed speakers are out and about addressing various audiences, which will undoubtedly create room for investors to parse what they’re saying for additional policy insights. “The next Fed meetings in November and December are likely to be eventful. With investors and mortgage rates both anticipating further short-term rate hikes in these meetings, there is the potential for surprise in either direction,” says Hale.

“Three factors mainly affect today’s market: expectations on inflation, economic growth and the Fed’s policy … As inflation remains stubbornly elevated, the Federal Reserve will continue to raise interest rates in its efforts to curb high inflation,” says Nadia Evangelou, director of real estate research at the National Association of Realtors (NAR). But concerns about economic growth can put a damper on the pace of mortgage rate increases, she adds.

And Jeff Tucker, senior economist at Zillow says rates changing this quickly means buyers can feel frozen as what they can qualify for can change week to week. “This is having a chilling effect on both first-time buyers and move-up buyer-sellers,” says Tucker.