U.S. mortgage rates inched lower this week, backing off from an eight-month high as inflation showed welcome signs of cooling.
Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan fell to 6.78% from 6.96% the previous week, the first decline since June and the biggest one-week drop since March.
The rate remains well above the 5.54% recorded just one year ago and the pre-pandemic average of 3.9%.
COMMERCIAL REAL ESTATE MARKET COULD CRASH SOON. HERE’S WHY
“As inflation slows, mortgage rates decreased this week,” said Sam Khater, Freddie Mac’s chief economist. “Still, the ongoing shortage of previously owned homes for sale has been a detriment to homebuyers looking to take advantage of declining rates. On the other hand, homebuilders have an edge in today’s market, and incoming data shows that homebuilder sentiment continues to rise.”
The average rate on a 15-year mortgage – which is more popular among homeowners who choose to refinance – dropped to 6.06%, down from last week’s 6.3%.
The Federal Reserve’s aggressive interest-rate hike campaign sent mortgage rates soaring above 7% last year, quickly cooling the red-hot housing market. But rates have been slow to retreat from the nearly two-decade high, forcing many would-be buyers out of the market.
MORTGAGE CALCULATOR: SEE HOW MUCH HIGHER RATES COULD COST YOU
Even just a minor change in rates can affect how much would-be homebuyers pay each month.
A recent study from LendingTree compared the average monthly payments on 30-year fixed-rate mortgages in April 2022 – when the rate hovered around 3.79% – and one year later, when rates jumped to 5.25%.
It found that higher rates cost borrowers hundreds more each month and potentially added as much as $75,000 over the lifetime of the 30-year loan.
Despite higher interest rates, home prices have been slow to fall as would-be buyers face a worsening inventory shortage.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
That is largely because sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell with rates continuing to hover near a two-decade-high, leaving few options for buyers.
A recent report from Realtor.com showed that the number of available homes on the market in June was down more than 47% from the typical amount before the COVID-19 pandemic began in early 2020.
“It is not likely we will see mortgage rates below 6% before the end of 2023,” said Lisa Sturtevant, the chief economist at Bright MLS. “But rates should continue to come down from where they have been this summer. The question is whether they will fall enough to entice sellers into the market who will have to give up the super low mortgage rate they secured during the pandemic.”
Read the full article here
