Many Americans expect mortgage rates and home prices to continue rising: survey

More Americans than ever are expecting mortgage rates to continue rising in the year ahead, according to a Fannie Mae survey. 

It seems consumers are bracing for higher interest rates, with a majority of Americans saying they expect mortgage rates to increase in the next 12 months, according to new data from Fannie Mae. 

About 67% of respondents said they expect mortgage rates will go up – which marked an all-new survey high, according to Fannie Mae’s Home Purchase Sentiment Index (HPSI). Overall, the index increased 3.5 points to 75.3 in February, showing that consumers are growing more optimistic about housing. But affordability constraints are weighing against that optimism. 

"A survey-record share of consumers – particularly homeowners and higher-income individuals – expect mortgage rates to increase in the next 12 months, likely owing to signals that the Fed will raise rates to slow the pace of inflation," Doug Duncan, Fannie Mae senior vice president and chief economist, said.

The current 30-year mortgage rate is below 4% annual percentage rate (APR), according to data from Freddie Mac. If you want to take advantage of current interest rates before they increase, you could consider refinancing your mortgage loan. Visit Credible to find your personalized rate without affecting your credit score.

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Home prices continue to rise

Alongside higher mortgage rates, many Americans also believe home prices will continue to rise over the next year, the survey said. The number of respondents with this opinion rose by three percentage points from January to 46%. 

Due to factors such as rising home prices, homeowners said they were encouraged that this was both a good time to buy or sell a home. However, renters are struggling to become buyers in today’s market as a result of increased affordability challenges.

"High home prices continue to be the most commonly cited reason by consumers for their belief that it’s a good time to sell (and a bad time to buy) a home; notably, the ‘good time to buy’ sentiment among renters dropped to a new survey low," Duncan said. "This suggests that homeowners and higher-income groups may recognize the importance of getting ahead of the rising rate environment, while renters are keenly feeling the double constraint on home purchase affordability of rising house prices and rising interest rates."

Homeowners who want to take advantage of their higher home values without selling the home can consider a cash-out refinance. Visit Credible to compare multiple lenders at once and choose the one with the best interest rate for you.

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Federal Reserve to raise interest rates in March

The Federal Reserve has indicated that it intends to raise interest rates in March amid high inflation, which contributed to Americans’ belief that mortgage rates will increase over the next year, according to the survey. Continued economic improvement such as February’s strong jobs report continue to strengthen the Fed’s case for a rate hike. 

"The HPSI increased moderately in February, though the index still remains slightly lower on a year-over-year basis," Duncan said. "Continued negative perceptions around homebuying conditions were offset in part this month by consumers’ increased sense of job security, which we believe is likely due to labor market tightness and declining COVID case counts."

Although this survey on consumer optimism was conducted before the Russian invasion of Ukraine, the Federal Reserve has since indicated that it still plans to raise the federal funds rate despite the economic uncertainty caused by the conflict.

To see if a mortgage refinance is the right option for you, you can contact Credible to speak to a home loan expert and get all of your questions answered.

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