By Don DeBat

2-May-23 – If you are a prospective home buyer in Chicago, the outlook for locking in an affordable mortgage this spring is fading into the horizon.

The worried eyes of the Federal Reserve are fixed on “core” inflation, which rose 0.3 percent from February to March – and 4.6 percent from a year earlier – according to a report from the United States Department of Commerce.

Some nervous Fed officials are concerned that core inflation hasn’t declined much since reaching 4.7 percent last July. So, experts predict that the Fed likely will soon raise its funds rate at least a quarter of a percentage point to a range of 5 to 5.25 percent.

On April 27, the Freddie Mac Primary Mortgage Market Survey reported that benchmark 30-year fixed home loans rose to 6.43 percent from 6.39 percent a week earlier. A year ago, the popular 30-year fixed loan averaged 5.10 percent.

Mortgage buyer Freddie Mac also reported that 15-year fixed loans inched lower to 5.71 percent from an average of 5.76 percent a week earlier. A year ago, the 15-year fixed loan averaged 4.40 percent.

Mortgage rates have eased a bit over the past five months. On November 10, the Freddie Mac survey reported that 30-year fixed-rate home loans nationwide hit an average of 7.08 percent.

Interest rate creep isn’t only being felt in the mortgage market. Credit card interest rates also are on the rise. The Annual Percentage Rate on a typical Citi credit card, which is indexed to the Prime Rate, skyrocketed to 17.49 percent in April from 9.99 percent in January 2023.

The cardholder’s eyes popped when the new APR for cash advances zoomed to 29.49 percent from 21.99 percent. A borrower would be quoted better rates on a Mafia juice loan.

However, Sam Khater, Freddie Mac’s chief economist, sees some sunlight on what other experts view on the cloudy horizon.

“The 30-year fixed-rate mortgage increased modestly for the second straight week, but with the rate of inflation decelerating, rates should gently decline over the course of 2023,” said Khater (left). “Incoming data suggests the housing market has stabilized from a sales-and-house-price perspective.”

Khater is forecasting the prospect of lower mortgage rates for the remainder of the year.

“This should be welcome news to borrowers who are looking to purchase a home,” he said.

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home-purchase loans for borrowers who place 20 percent down and have excellent credit.

Borrowers who shop around may find better deals, according to RateSeeker.com. For example, on April 27, First Savings Bank of Hegewisch was quoting 5.611 percent on 30-year fixed rate home loans with a 20 percent down payment. The bank charges a loan origination fee of $615.

Mutual of Omaha was quoting 5.922 percent on 30-year fixed loans with a 20 percent down payment and a loan origination fee of $850. Fifteen-year fixed mortgages are available at 5.375 percent with 20 percent down and an $850 loan fee.

Searching for a better deal, some borrowers are beginning to flock to risky adjustable-rate mortgages (ARMs).