### 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.
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 current housing market is facing challenges due to rising interest rates and higher prices, leading to a slowdown in home sales, but the market is more resilient and better equipped to handle these fluctuations compared to the Global Financial Crisis, thanks to cautious lending practices and stricter regulations.
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.
Mortgage rates topping 7% have led to a significant drop in mortgage applications for home purchases, with last week seeing the smallest volume in 28 years. The increase in rates, driven by concerns of high inflation, has priced out many potential buyers and contributed to low housing supply and high home prices. As a result, sales of previously owned homes have declined, and homeowners are reluctant to sell their properties due to the higher rates. Some buyers are turning to adjustable-rate mortgages to manage the increased costs.
Despite high interest rates, house prices in the US have not declined, leading to frustration and confusion in the housing market as buyers face fierce competition and limited inventory.
British home prices are expected to fall by 4% this year due to high interest rates and living costs, despite the shortage of supply, according to a Reuters poll, with potential buyers being kept out of the property market; however, prices are expected to recover from 2024.
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.
The number of homes for sale in the US continued to decline in August, down by 9.2% compared to the previous year and 45% below pre-pandemic levels, leading to higher home prices and affordability concerns.
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.
UK inflation has slowed to a 17-month low of 6.8%, prompting expectations of potential interest rate cuts and concerns about the impact on house prices and 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.
Mortgage rates have been decreasing and could fall further this month if inflation continues to come down.
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.
British house prices experienced the most widespread falls in 14 years in August due to weakened demand, high mortgage costs, and economic uncertainty, according to a survey conducted by the Royal Institution of Chartered Surveyors (RICS).
Housing affordability is expected to worsen due to the delayed impact of higher mortgage rates, with home prices predicted to rise 0.7% year over year and reach a new record high, according to Morgan Stanley.
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.
The Greater Boston housing market experienced a slow month in August, with home sales dropping to their lowest point for the month since 2010, primarily due to higher interest rates and a shortage of available homes for sale, leading to increased competition and higher prices for buyers.
US housing starts fell to their lowest level in three years, indicating a slowdown in homebuilding activity due to mortgage rates lingering above 7%.
Inflation in Britain slowed for a third consecutive month in August, defying expectations of a rise due to higher fuel prices, with consumer prices rising 6.7 percent compared to the previous year, driven by slower increases in food prices and a decline in hotel room costs. Core inflation also fell more than anticipated, indicating a potential easing of inflationary pressures, though price growth remains uncomfortably high. The Bank of England is set to announce its decision on interest rates, with growing speculation that rates may be held steady due to signs of slowing inflation and a weak economy.
Inflation in the UK fell to 6.7% in August, the lowest level in a year-and-a-half, driven by slower food price increases and a drop in hotel and air fare costs, although fuel prices rose; economists had expected the figure to increase due to rising fuel prices.
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.
U.S. existing home sales fell 0.7% in August due to high mortgage rates and a worsening supply shortage, with prices reaching a record high.
The Bank of England has decided to halt interest rate rises due to unexpected inflation slowdown, while housing markets in major global economies, including the US, Germany, and the UK, are showing signs of slowing down. Additionally, there have been developments in various countries' economic outlooks and key interest rates.
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.
Sales of newly built homes in the housing market decreased by 8.7% last month, indicating that higher mortgage rates are negatively impacting the industry.
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.
30-year mortgage rates experienced their largest one-day drop since early March, falling almost three-tenths of a point to a record low, following a surge to a 23-year high the day before, prompting potential homebuyers to shop around for the best mortgage option.
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.
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.
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