If you're in the market to purchase a home in St. George, Utah this year, you're likely keeping an eye on the current state of mortgage rates. Mortgage rates play a pivotal role in determining what you can afford when securing a home loan, and given the challenges of affordability in today's real estate market, you might want to take a step back and analyze the broader historical context of mortgage rates. It's essential to comprehend their association with inflation to gain insights into the potential trajectory of mortgage rates in the near future.
Providing Local Insight
In our picturesque corner of Southern Utah, we've seen various trends in mortgage rates over the years. Freddie Mac has been monitoring the 30-year fixed mortgage rates since April 1971. Their weekly Primary Mortgage Market Survey combines mortgage application data from lenders nationwide, offering valuable insights (refer to the graph below):
If you focus your attention on the right side of the graph, you'll notice a noticeable uptick in mortgage rates since the beginning of last year. However, it's worth noting that even with this increase, today's rates remain below the 52-year average. While historical context is essential, most prospective buyers have become accustomed to mortgage rates hovering between 3% and 5% over the past 15 years.
This historical perspective is significant because it might explain why recent rate hikes may feel like a shock, despite them aligning with long-term averages. Although many buyers have adapted to these elevated rates over the past year, a slightly lower rate would undoubtedly be a welcome sight. To gauge the possibility of such a scenario, let's look at inflation.
Anticipating Mortgage Rate Trends
Since early 2022, the Federal Reserve has been diligently working to curb inflation. This is noteworthy because, historically, there exists a clear correlation between inflation and mortgage rates.
The graph provided underscores a consistent relationship between inflation and mortgage rates. On the left side of the graph, you can observe that each time inflation experiences significant fluctuations (indicated in blue), mortgage rates tend to follow suit shortly thereafter (indicated in green).
The circled section of the graph highlights the most recent surge in inflation, closely trailed by an uptick in mortgage rates. However, as inflation has tapered off somewhat this year, we haven't witnessed a corresponding drop in mortgage rates.
Based on historical patterns, it suggests that the market may be poised for mortgage rates to mirror the trajectory of inflation and eventually move downward. While it's impossible to make precise predictions about future mortgage rates, the current moderation in inflation hints at a potential decrease in mortgage rates in the near term.
In Conclusion
To gain insights into the future of mortgage rates, it's essential to look back at their historical trends. There's a discernible connection between inflation and mortgage rates, and if history serves as a guide, the recent decline in inflation may bode well for the future of mortgage rates, aligning with your aspirations of homeownership in St. George, Utah. At the end of the day, marry the house and date the rate. Get the home of your dreams now and you can always refinance later *if* rates go down. If they don't go down, be glad you got the rate you did. One thing is certain, home prices will continue to appreciate in the St. George real estate market.