### Summary
Mortgage rates have reached a 21-year high, making home buying more expensive and deterring potential buyers. The increase in rates is largely due to the Fed's monetary policy, including interest rate hikes to combat inflation. Higher rates have also impacted sellers, leading to a decrease in housing supply.
### Facts
- Mortgage rates have climbed to 7.09 percent, a significant increase from the previous year's 5.13 percent.
- Higher mortgage rates have led to more expensive monthly payments for homebuyers, even if the house price remains the same.
- The Fed's interest rate hikes have indirectly affected long-term mortgage rates by making it costlier for banks to borrow money.
- The increase in rates has deterred potential buyers, with 66 percent of them waiting for rates to decrease before purchasing a home.
- Sellers have been less likely to list their homes due to the high rates, leading to a decrease in housing supply.
- It may take some time for rates to come back down, and experts predict downward pressure on rates throughout 2024.
### Summary
House price inflation in Britain slowed in June, with the exception of London, as high mortgage rates deter buyers. Meanwhile, in the US, policymakers are divided over the need for more interest rate hikes, and China's central bank cut a key interest rate due to economic risks.
### Facts
- 💰 Average UK house prices increased by 1.7% in June, down from 1.8% in May, with London being the only region where property prices fell by 0.6%.
- 💸 Policymakers in the US are divided over the need for more interest rate hikes, with "some participants" concerned about the risks of raising rates too far, while "most" officials prioritize battling inflation.
- 🇨🇳 China's central bank unexpectedly cut a key interest rate, the one-year medium-term lending facility (MLF), by 15 basis points to 2.5%, and also lowered the seven-day reverse repo rate to 1.8%.
- 📉 The rate cuts in China were implemented due to a deteriorating property market, weak consumer spending, and sluggish economic data, including trade and consumer price numbers as well as record-low credit growth.
High mortgage rates, reaching their highest level in 21 years, are driving up costs for home buyers and creating a sluggish housing market, with little relief expected in the near term.
The cost of buying a home in the UK has become more difficult due to a steep surge in interest rates, despite wages increasing faster than house prices over the past year, according to mortgage lender Halifax.
The surge in mortgage rates has caused housing affordability to reach the lowest level since 2000, leading to a slow fall in the housing market and a potential dip in home prices, although the current market differs from the conditions that preceded the 2008 crash, with low housing inventory and a lack of risky mortgage products, making mortgage rates the key lever to improve affordability.
The recent downturn in global property prices is ending as average home prices are expected to fall less than anticipated and rise into 2024, according to a Reuters poll, due to factors such as high savings, limited supply, and rising immigration. However, this poses challenges for first-time homebuyers and rental affordability is expected to worsen.
Surging interest rates in the UK have led to a slump in factory output, the biggest annual drop in house prices since the global financial crisis, and signals of distress in different sectors of the economy, posing a dilemma for the Bank of England as it decides whether to raise interest rates further.
Home prices, which had been steadily rising since January, may be starting to decline again due to weakening month-to-month gains and higher mortgage rates.
Rapidly falling house prices have caused a "cost of owning crisis," with tens of thousands of homeowners falling into negative equity over the past year, making it difficult to sell or remortgage properties. Experts predict that more households will face difficulties as house prices continue to decline, with the Government's tax and spending watchdog expecting a 10% fall in prices. However, there are expectations of a rebound in house prices in the future, particularly for those intending to live in their homes for several years.
US mortgage rates have decreased slightly for the second consecutive week, but they remain above 7%, causing home affordability to reach its lowest level in nearly four decades.
The current housing market has defied expectations of a downturn in real estate prices caused by surging mortgage rates, with prices and demand remaining strong due to increasing household formation among baby boomers, according to a Wall Street economist.
Mortgage rates remain elevated, slowing housing market activity, and while home prices are not likely to fall significantly, rates are projected to decrease in 2023 and 2024.
Mortgage rates are expected to trend down this year, although the exact timing is uncertain, with the Bureau of Labor Statistics' release of the latest Consumer Price Index data likely providing more insight, according to experts. Higher-than-expected inflation could keep rates elevated or even push them higher.
More than a third of homes for sale in the UK have experienced price cuts, the highest proportion in over a decade, suggesting that some sellers were initially too optimistic about their asking prices, according to property website Rightmove. The average size of the reduction is also the largest since January 2011 at 6.2%, with the typical cut amounting to £22,709. The housing market has been affected by a slump following consecutive interest rate rises, although there are signs of activity starting to pick up.
UK homeowners are feeling the strain as interest rates remain high, with many struggling to afford increased mortgage payments and considering drastic measures such as taking in lodgers or canceling expenses in order to make ends meet.
The United States housing market has seen a 21 percent decline in previously occupied home sales over the past year, continuing the slowdown caused by rising interest rates, while prices continue to rise despite the decrease in sales, leading to a shortage of affordable homes and worsening home affordability for the foreseeable future.
The rise in housing prices over the past three years can be attributed to a shortage of supply, low volume in the market, and the introduction of mortgage rate buydowns; however, there is now a risk of too much inventory being introduced into the market, and a potential decline in mortgage rates could lead to a large amount of existing homes being sold and a subsequent oversupply.
Despite predictions of falling prices and mortgage rates, the housing market continues to defy logic with rising prices and high rates due to factors such as limited supply, increased demand, and uncertainties in the economy and secondary mortgage market.
Mortgage rates have increased in the past week, and while experts believe rates are unlikely to reach record lows seen during the pandemic, there is a possibility of rates decreasing before the end of the year if inflation continues to moderate. It is advised for homebuyers to focus on improving their credit scores and saving for a down payment to increase their chances of qualifying for the best rate.
Mortgage applications and housing demand have dropped as a result of increased mortgage rates, which are now at their highest levels in over 20 years, leading to limited inventory and fewer options for buyers.
The average rate on a five-year fixed mortgage in the UK has dropped below 6% for the first time since July, providing some hope for borrowers, although rates are still higher than they were a few months ago, and experts do not expect rates to reach the ultra-low levels seen in the past.
Experts are divided on the future of US home prices, with some predicting a surge and others expecting a decline, as homeowners are reluctant to sell their homes with cheap mortgages and buyers are hesitant to overpay. Jeremy Grantham believes prices will come down by 30%, while Barbara Corcoran predicts a surge of 15% to 20% once interest rates decrease. David Rosenberg forecasts a recession and a potential 25% plunge in house prices, while Glenn Kelman believes the housing market has hit rock bottom. Vincent Deluard expects prices to drop when homeowners eventually sell.
UK mortgage approvals have reached their lowest level in six months due to high interest rates cooling the housing market, according to the Bank of England, with net mortgage approvals for house purchases falling to 45,400 in August from 49,500 in July.
As the US housing market starts to cool down, homebuyers are being presented with a good opportunity as more homes see price reductions, according to Zillow, with 9.2% of listings having a price cut in the week ending September 16, a higher rate than in 2019.
Rising mortgage rates are impacting home affordability, which has been declining since early 2021, causing some sellers to reduce their asking prices, but the lack of available properties remains a challenge for most buyers.
Mortgage rates have continued to rise, causing a 6% decrease in mortgage demand and the lowest level of activity in the housing market since 1995.
Mortgage rates in the U.S. housing market are approaching 8%, causing concern and potentially discouraging home-buying demand due to higher monthly mortgage payments relative to incomes.
The housing market is slowing down due to soaring mortgage rates, which could lead to an economic downturn as home construction is curbed and growth prospects falter, according to billionaire investor Bill Gross.
The housing market is currently experiencing high mortgage rates and rising home prices, making affordability worse than in 2008, according to Goldman Sachs analysis. Despite stronger consumer fundamentals, housing affordability has deteriorated beyond 2006 levels, and without an increase in home supply, unemployment, or a drop in mortgage rates, home prices are expected to continue climbing.
Mortgage rates are expected to fall in the coming months, offering homebuyers more affordability and potentially boosting the housing market.
High mortgage rates are expected to fall over the next year, with rates projected to decrease to 6.1% by the end of 2024 and the 30-year mortgage rate falling to 5.5% by the end of 2025, driven by a slowing U.S. economy and signs of a weakening economy, according to the Mortgage Bankers Association.
Mortgage rates are expected to decrease significantly by the end of 2024, but a shortage of available homes will lead to higher sales prices for the next few years. Despite the drop in rates, the low inventory of new homes will drive up purchase costs. Additionally, a sluggish economy, rising unemployment, and declining inflation may lead to a recession in early 2024. However, the combination of these factors will eventually help bring down mortgage rates further in the following years.
Home prices rising alongside high mortgage rates have made the housing market the least affordable it has been since the early 2000s, with sellers reluctant to sell and buyers struggling with high spending on housing, leading to low existing-home sales volumes and a "lock-in" effect.
The housing market is expected to experience a downturn in the near future due to factors such as high mortgage rates, high home prices, and limited supply, making it increasingly difficult for homebuyers to afford a home.
Mortgage rates reaching 8% are causing a tighter supply of homes for sale, leading to increased demand and further deteriorating affordability, according to Morgan Stanley analysts who warn that if rates stay at this level, affordability would reach its most severe level in decades. Despite the unaffordability, the analysts predict that home prices will likely increase due to low supply and a lack of negative shocks to the broader economy.
If mortgage rates stay at their current level, home prices could drop by as much as 5% next year, according to Morgan Stanley, and if rates remain close to 8%, it could have an even more negative impact on home prices in the long term.
The housing market is facing significant challenges, with a 15% drop in home sales leading to a 13-year low, and economists predicting a "deep freeze" reminiscent of the Great Recession of 2010 or the housing recession of the 1980s, while Zillow has revised its forecast for home price growth downward due to higher mortgage rates.
