The average long-term U.S. mortgage rate declined for the fifth straight week, even as the Federal Reserve just raised its key borrowing rate for the seventh time this year and signaled there were more to come in 2023.
The 30-year fixed-rate mortgage averaged 6.31%, down from 6.33% last week, according to mortgage packager Freddie Mac. A year ago, the 30-year FRM averaged 3.12%.
The 15-year fixed-rate mortgage averaged 5.54% also down from last week when it averaged 5.67%. A year ago, the 15-year FRM averaged 2.34%.
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The Federal Reserve raised its rate again Wednesday by 0.50 percentage points in a bid to bring down the highest inflation in decades. It was the Fed’s seventh increase this year and pushed the central bank’s key rate to a range of 4.25% to 4.5%, its highest level in 15 years.
More surprisingly, the policymakers forecast that their key short-term rate will reach a range of 5% to 5.25% by the end of 2023. That suggests that the Fed is poised to raise its rate by an additional three-quarters of a point and leave it there through next year.
The Fed made clear, in a statement and a news conference by Chair Jerome Powell, that it thinks sharply higher rates are still needed to fully tame the worst inflation bout to strike the economy in four decades.
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Co-Founder and CEO John Paasonen of digital mortgage platform Maxwell told FOX Business that while the housing market has slumped because of higher than usual mortgage rates, “2023 could see a fast recovery.”
“Homebuyers sitting on the sidelines won’t do so for long. Loan defaults and foreclosures aren’t happening at 2008s alarming rate, and while interest rates have risen, borrowers have been advancing careers and savings, new-found purchasing power could help to trigger a recovery,” Paasonen added.
“Housing affordability,” he told FOX Business, “is at the lowest levels ever in history. It is not sustainable … market conditions will change to increase loan demand for new home purchases in 2023 from the current levels. Pent-up demand will drive homebuyers — seeking to upgrade or downsize or enter the market in 2023.”
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The Associated Press contributed to this story.