Danielle Hale, Chief Economist for Realtor.com®, said, "Mortgage rates will remain relevantly high. It is certainly possible for rates to exceed 7%, but our expectation is that rates will begin to gradually decline later in the year as inflation declines."

As of Tuesday afternoon, the average rate for a 30-year fixed-rate loan was 7.04 percent, according to Mortgage News Daily.

Despite the Fed raising rates to a 22-year high, Fed officials have said they could raise rates again this year if inflation and the overall economy don't continue to cool.

Even though the previous 10 rate hikes have been at the fastest pace in 40 years, the economy has been resilient and the labour market has been surprisingly strong, Greg McBride, Bankrate's chief financial analyst, said in a statement.

The Fed's goal is to bring inflation down to 2 per cent. While the Fed has made progress in curbing inflation, which fell from a high of 9.1 per cent in June last year, by June this year it had fallen by just 3 per cent year-on-year. Meanwhile, the economy remains strong and unemployment is low.

"They're more likely to freak out after high inflation data, and they're less likely to let their guard down after low inflation data," Hale said." The Fed would rather err on the side of caution and not give inflation room to reignite."

She expects mortgage rates to be slightly above 6 per cent by the end of the year.

That would be a big plus for homebuyers who have been squeezed out of the market. It's also likely to entice some potential sellers to abandon the wait-and-see approach. Many homeowners are reluctant to trade up or down and relocate, giving up the 3% mortgage rate they received during the COVID-19 pandemic. If they purchase a new home with a new mortgage, they will be on the hook for a higher interest rate and higher monthly payments.

Another complicating factor is that higher mortgage rates have not pushed down home prices. The reason home prices remain high is because of the housing shortage. There are still more people looking for homes than there are homes available. This has led to bidding wars for many homes, with bids constantly exceeding asking prices.

That's why the national median list price fell just 0.9% to $445,000 in June.

Shmuel Shayowitz, president of Approved Funding in Riverside, N.J., said mortgage rates are likely to fall as long as the Federal Reserve finishes raising interest rates or only raises them once this year.

I wouldn't be surprised if we see [mortgage] rates around 5 percent by the end of the year," Shayowitz said.

Homebuyers who can still afford to purchase a home have largely accepted higher rates. Many plan to refinance when rates drop.

However, many are opting for smaller, less expensive homes, or for more affordable areas, or for properties that don't have everything they want in order to make the maths make sense.

"I don't think this rate hike, and whether or not there will be a rate hike in September, is going to have any impact on the behaviour of home buyers," Shayowitz said. Those who need to buy a home and those who can afford to buy a home will still continue to do so."