Mortgage rates in the US went up this week after a couple of weeks of small decreases. Rates have been over 7% for five weeks due to ongoing inflation.
30-Year Fixed-Rate Mortgage
The 30-year fixed-rate mortgage averaged 7.18% in the week ending September 14, up from 7.12% the previous week. A year ago, it was 6.02%.
Reason for Higher Rates
Mortgage rates are staying high because inflation is still a problem, and the economy is strong. Sam Khater, the chief economist at Freddie Mac, said, “The reacceleration of inflation and strength in the economy is keeping mortgage rates elevated.”
How Rates Are Calculated
The average mortgage rate is based on applications Freddie Mac gets from lenders across the US. It includes people who put down 20% and have good credit.
Watching the Federal Reserve
The Federal Reserve is being watched closely because it could affect mortgage rates. The Fed has been trying to fight inflation by raising interest rates. This week’s inflation data is important because it could influence the Fed’s next steps.
Inflation is high, and it’s not coming down quickly. The Fed wants inflation to be around 2%, but it was 3.3% in July according to the Personal Consumption Expenditures index. The Consumer Price Index (CPI) also rose by 3.7% in August compared to the previous year.
Housing costs are a big part of inflation. Data shows that the cost of renting a place to live has been going down, but there’s a delay in how this affects the overall inflation rate. So, it might take some time for these changes to show up in the data.
While rental prices are going down, home prices for sale are going up. This adds uncertainty to the situation.