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Mortgage rates have doubled since the start of 2022, slamming the breaks on a superheated housing market. But is 7% as high as they’re going to go?

Maybe.

“We probably have seen peak mortgage rates unless there is some other major shock to the economy,” says Cris deRitis, deputy chief economist at Moody’s Analytics. 

The case for optimism is that inflation came in softer than expected in October, with the Consumer Price Index showing prices up 7.7% year-over-year, after months at 8% or higher. That was a positive sign that inflation is coming down, and it sent the stock market soaring and mortgage rates dropping.

The average 30-year mortgage rate fell 23 basis points this week to 6.85%, according to a survey by Bankrate, which like NextAdvisor is owned by Red Ventures.

But one bit of good economic news isn’t quite enough to determine if the tide has turned against the highest inflation in 40 years.

“I’m hoping that I’m also in that camp of ‘we’ve hit the peak,’ but we won’t know that for sure until next month,” says Nicole Rueth, producing branch manager with the Rueth Team Powered by OneTrust Home Loans. “It would take a lot to push us back above 7% again.”

Here’s why experts say mortgage rates might be turning around, and what to look out for next.

Why Mortgage Rates Are So High

To understand where rates could go next, it’s important to understand how they got to where they are now. The big surge has to do with inflation and the market for bonds, particularly mortgage-backed securities, which are bundles of mortgages that are packaged and sold to investors.