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Mortgage rates could go up to 8% after the U.S. Federal Reserve refrained from raising interest rates again on Wednesday but forecast rates would stay high through next year, real estate economists say.
The central bank on Wednesday announced that it was leaving its benchmark interest rate unchanged, but a majority of officials expect another rise before the end of the year.
With the 10-year Treasury note
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yield heading towards 4.5% on Thursday in the wake of the Fed’s decision mortgage rates could be “substantially higher in the short run,” Lawrence Yun, chief economist at the National Association of Realtors, said during a press call discussing existing home sales for the month of August.
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Also see: U.S. home sales fall in August to the lowest level since January
As of Thursday morning, the 10-year Treasury note yield was over 4.4%.
“It is possible that mortgage rates may go up to 8% in the short run before by the spring of next year retreating” as the economy cools off, he explained. Home sales fell in August, and could drop even further if rates rise, Yun added.
With the Fed keeping another fed funds rate hike in its back pocket, “mortgage rates are not likely to drift lower in the absence of new data warranting a reconsideration of the outlook,” Danielle Hale, chief economist at Realtor.com, said in a statement. “This means that the affordability headwinds that buyers face are likely to continue.”
Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.
Expect rates to stay elevated until other economic indicators show signs of cooling, Zillow’s Orphe Divounguy said.
“Mortgage rates have been extremely volatile this year, as investors have been reacting to the latest inflation and economic data depending on their expectations about what the Fed will do next. Unfortunately, that’s likely to continue until the end of the Fed tightening cycle,” Divounguy said in a statement.
See: U.S. mortgage rates ‘remain anchored’ north of 7%, Freddie Mac says
Inflation readings next week “will likely lead to large swings in mortgage rates,” he added.
