Fed pauses as 7.18% mortgages punish buyers — but a big Dec. 9 hike means more pain may follow. Lock in your yield now
By Google News Personal Finance ·
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This week's mortgage rate drop would save a buyer about $14 a month on a $350,000 loan. They'd still pay $223 more a month than someone who borrowed the same amount a year ago.
The average 30-year fixed mortgage rate fell to 7.18% on Nov. 5 (1), its third straight weekly decline.
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But there's still an appetite for higher rates.
"Inflation is too high," Fed Chair Kevin Warsh said at his Oct. 28 press conference (2). He pointed to rising energy prices and said the Fed was watching for signs those increases were pushing up prices elsewhere.
The Fed voted 10–2 to hold its benchmark rate at 3.75% to 4% (3). Fed Gov. Lisa Cook and Cleveland Fed President Beth Hammack both wanted a quarter-point increase.
A year ago, $2,148 a month in principal and interest covered a $350,000, 30-year mortgage at approximately 6.22%. At 7.18%, that same payment covers about $317,000. If your down payment stays the same, that leaves you with roughly $33,000 less to spend on a home.
The inflation numbers help explain why it could raise rates again on Dec. 9.
The Fed's preferred inflation measure rose 3.6% from a year earlier in September (4), well above its 2% target. Even excluding food and energy, prices were up 3.1% (5).
The pressure to raise rates goes beyond the two officials who dissented…
Originally published by Google News Personal Finance
