Can you avoid that 6% mortgage rate? Here’s what pros think will happen next with mortgage rates

Greg McBride, chief financial analyst at Bankrate, says the economy will slow faster than inflation so more yo-yo action with rates should be expected in September, but it won’t be huge swings we’re seeing. But, he adds, we should keep in mind that the pace of the Federal Reserve’s balance sheet runoff will double beginning in September. “This will be the most evident in the market for mortgage-backed securities. All else being equal, this is an upward influence on mortgage rates,” says McBride. (You can see the lowest rates you can get here.)

According to the National Association of Realtors, (NAR), data is showing that mortgage rates have already priced in the upcoming Fed rate hikes. “Meanwhile, inflation has likely peaked, which means that it will gradually decline in the following months. Thus, I don’t expect to see any big surprises in the mortgage market in the following months,” says Nadia Evangelou, senior economist and director of forecasting at NAR. “While there are signs inflation may have peaked, a half-percentage point rate hike is more presumable [this month]. So, mortgage rates won’t be affected significantly by the upcoming hike,” says Evangelou.

For its part, NerdWallet points out that the Fed will update its interest rate policy on September 21. While “rates often stabilize in the two or three weeks prior to Fed meetings …. the aftermath of the announcement could be another matter,” the site writes. That could mean “up-and-down swings in mortgage rates” and the site warns: “borrowers should brace themselves: mortgage rates could ratchet upward, like someone climbing a ladder two rungs up and one rung down. Such a path would be consistent with this year’s upward trend for mortgage rates.” (You can see the lowest rates you can get here.)

And as Mike Fratantoni, MBA chief economist, noted in a statement: “Mortgage rates moved higher … as markets continued to re-assess the prospects for the economy and the path of monetary policy, with expectations for short-term rates to move and stay higher for longer.” He added: “Recent economic data will likely prevent any significant decline in mortgage rates in the near term, but the strong job market depicted in the August data should support housing demand.”

Of course, all the pros are just making their best guess, and investors have been trying to read the tea leaves on the economic outlook for the past few months and mortgage rates have been zigzagging during that time. But the reality seems to be that while there isn’t a clear consensus on where they will go, most pros we spoked to said there wouldn’t be a big dip in rates.

Is an ARM the right choice if you want a lower rate?

For buyers who don’t plan to stay in their homes for more than about five years, an adjustable-rate mortgage may offer a lower, fixed interest rate during the initial years of homeownership, helping lower their monthly payments. “This option may be ideal if you plan to sell your home before the loan switches to an adjustable rate,” says Steve Reich, chief operations officer at Finance of America Mortgage. Just note that ARMs will adjust, and when they do you may be in for a higher bill.