The average 30-year fixed-rate mortgage rate increased to 6.81% for the week ending July 27, 2023, up from 6.78% last week, according to the latest data by Freddie Mac. At the same time, the average 15-year fixed-rate mortgage jumped to 6.11%, up from 6.06% last week.
The data followed the Federal Reserve’s anticipated interest rate increase. But despite a tense interest rate environment, consumers have been confident about spending capabilities, according to Freddie Mac.
"Mortgage rates inched up slightly after a significant decline last week," Freddie Mac Chief Economist Sam Khater said in a statement. "Higher interest rates continue to dampen activity in interest rate-sensitive sectors, such as housing. However, overall U.S. consumer confidence is unwavering, surging to a two-year high in the Conference Board’s Consumer Confidence Index for July 2023. Rising consumer confidence often leads to greater spending, which could drive more consumers into the housing market."
At this time last year, the average rate for a 30-year fixed rate mortgage stood at 5.30%.
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Housing price increases cool off
Despite overall higher mortgage rates, annual home price growth slowed for the 12th straight month in May, according to the latest data by CoreLogic. Home prices increased by 1.4% year-over-year in May.
"After peaking in the spring of 2022, annual home price deceleration continued in May," CoreLogic Chief Economist Selma Hepp said in a statement. "Despite slowing year-over-year price growth, the recent momentum in monthly price gains continues in the face of recent mortgage rates increases."
"Nevertheless, following a cumulative increase of almost 4% in home prices between February and April of 2023, elevated mortgage rates and high home prices are putting pressure on potential buyers," Hepp continued. "These dynamics are cooling recent month-over-month home price growth, which began to taper and is returning to the pre-pandemic average, with a 0.9% increase from April to May."
However, annual home price shifts in May varied significantly across different locations, according to CoreLogic. These are the areas that experienced drops in home prices.
- Idaho (-8%)
- Washington (-7.5%)
- Nevada (-5.6%)
- Montana (-5.3%)
- Utah (-4.3%)
- Arizona (-4.2%)
- California (-3.5%)
- Oregon (-3.1%)
- Colorado (-2.7%)
- South Dakota (-1.3%)
- New York (-0.3%)
- District of Columbia (-0.1%)
On the other hand, Miami posted the highest annual home price increase of 11.8% in May out of the 20 metro areas tracked by CoreLogic. Miami was followed by Atlanta and Charlotte, North Carolina, which each posted the next-highest gains at 4.4%.
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Fed could raise interest rates once more in 2023
To cool inflation down to its 2% target range, the Fed increased interest rates again in July. That brought the federal funds rate to a targeted range of 5.25% to 5.5%, its highest level in more than two decades.
The move also marked the 11th time the central bank increased rates since last year. Despite some positive economic indicators, it’s unclear whether the Fed would loosen its grip on monetary policy.
"The Fed's actions over the past year have had a similar cooling effect on inflation, with both the CPI and the PCE Price Index gliding down from around 9% to 3% territory," George Ratiu, Keeping Current Matters' chief economist, said in a statement. "As FOMC members see the 2% target within sight—especially without significant damage to the economy up to this point—they clearly want to make another push to reach the milestone."
Additional increases to the federal funds rate could affect interest rates on mortgages.
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