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Mortgage rates could hit double digits in 2023
Potential homebuyers will be able to feel the sting of the Federal Reserve’s increasing rate hikes in mortgage rates by 2023. Learn what this could mean for you in the long run.
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Rising mortgage rates could mean a freeze in the housing market.
Financial experts say that surging mortgage rates could hit 10% by 2023. Even if the Federal Reserve pauses its interest rate hikes. Christopher Whalen, the chairman of Whalen Global Advisors stated in an interview that these rate hikes have a lag effect in mortgage rates.
What that means is that the full impact of these Federal Reserve’s tight policies isn’t visible in the housing market for a long period after each hike. Whalen says that lenders usually adjust their mortgage rates very slowly.
Lenders are not used to interest rates moving as fast as they are now. Typically, they would only change rates once a month or once every other month. The Federal Reserve has been steadily increasing its benchmark interest rates since early 2022. The idea is to cool down the economy and slow a decades-high inflation.
Usually, the Federal Reserve’s rate hikes don’t have a direct influence over mortgages. However, these rates are more likely to increase as their policies become more restrictive. The result is a higher cost for potential homebuyers.
According to Whalen, mortgage rates could hit up to 10% in February 2023. That is even if the Federal Reserve’s Chair Jerome Powell decides upon a pause in interest rates hike at their last meeting in December.
Mortgage rates have already doubled since January
This week, the average 30-year fixed mortgage rates have hit close to 6.94% according to recent data. Since January, rates have more than doubled, and are expected to continue rising for the foreseeable future.
Financial experts believe that there’s a 95% probability that the Federal Reserve will increase its benchmark interest rates for the fourth time in a row during their scheduled meeting on November 1. Another significant increase is expected at their last meeting of 2022, in December.
Many believe that the Fed’s funds rate is going to lie between 4.75% and 5% by the end of the year. That is a sharp increase from the current 3% – 3.25% level. This time last year, the rate was almost zero, which highlights the fast pacing of the Federal Reserve’s policy tightening.
Redfin, a real estate firm, warned earlier last week that mortgage rates were going to get worse in the near future. That’s due to the rapidly cooling of the American housing market. Important data followed the warning, which showed U.S. home sales and new listings dropping to their lowest level on record.
Chen Zhao, Redfin’s economics research lead, said in a blog post that the housing market will get worse before it gets better. Since inflation is still rampant across the country, the Fed will probably continue its interest rates hike. That means the market won’t see high mortgage rates decrease until June or July of 2023.
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Millions of Americans will get inflation relief checks
Millions of Americans across California and Hawaii are getting inflation relief checks to help them with the rising cost of living. Follow the link below to check if you qualify and how to receive payment.
Americans are going to get inflation relief checks
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