Mortgage rates dropped further this week, although the Fed revised upward their forecast about inflation. Specifically, the 30-year fixed mortgage rate fell to 2.93% from 2.96% the previous week. In fact, mortgage rates remain at or below 3.00% for the ninth straight week. Thus, many homebuyers can benefit from these low rates while home prices are reaching record highs.
Since 85% of buyers finance their home purchase, mortgage rates are closely monitored. With mortgage rates currently near record lows, demand for housing is very strong and outpacing housing supply. According to NAR, there are 5 offers for every home available in the market while the typical home can be sold in less than 3 weeks. Nevertheless, as the economic outlook for the United States looks brighter for the rest of the year, mortgage rates are expected to rise in the following months. What does this mean for homebuyers and how much will these higher rates change the monthly payment? Although mortgage rates will rise, they will continue to be historically low. Economic indicators and employment have strengthened but there is still a way to go. Thus, don't expect rates to rise more than 40 basis points (0.4%). NAR forecasts the 30-year fixed mortgage rate to average 3.2% at the end of the year.
See below how much the monthly payment changes when rates rise by 0.3%, 0.5% and 1.0%.