Mortgage Rates Fall Below 7%

For the first time in a month, the 30-year fixed-rate mortgage fell back into the 6% range, bringing lower borrowing costs for home buyers who have been waiting for relief. “Spring home buyers received an unexpected windfall this week,” says Sam Khater, Freddie Mac’s chief economist.

The decrease in mortgage rates—the 30-year loan averaged 6.94% this week—may get more buyers moving. At this week’s rate, the monthly mortgage payment on a $407,600 existing home, which is the median price, would be $2,156, assuming a 20% down payment, says Jessica Lautz, deputy chief economist at the National Association of REALTORS®. For a newly built home at the median price of $433,500 for new construction, the monthly mortgage payment would be $2,293.

Rates below 7% “help buyer affordability,” Lautz says. Also, the latest home sales reports are showing an uptick in new listings. “Greater supply, coupled with the recent downward trend in rates, is an encouraging sign for the housing market,” Khater adds.

Still, “rates and housing affordability are the killjoys of the spring market,” Lautz says. “New- and existing-home sales are both down. Is this a housing market only for the wealthy? Twenty-eight percent of buyers last month paid with cash and did not care about mortgage rates, and the largest annual growth in existing-home sales was over $1 million.”

NAR reported this week that existing-home sales fell 2% in April both month over month and year over year. New-home sales are also down, falling nearly 8% last month compared to a year earlier.

“The last four weeks, mortgage rates have been above 7%, and this is clearly causing many potential home buyers to sit on the fence,” says Carl Harris, chairman of the National Association of Home Builders. However, “moderating rates, along with a dearth of existing inventory, should help new-home sales recover, as new construction will be needed to meet the demand for homes, especially during this crucial spring-summer season.”

Freddie Mac predicts the following averages with mortgage rates for the week ending May 23:

• 30-year fixed-rate mortgages: averaged 6.94%, falling from last week’s 7.02% average. A year ago, 30-year rates averaged 6.57%.
• 15-year fixed-rate mortgages: averaged 6.24%, dropping from last week’s 6.28%. Last year at this time, 15-year rates averaged 5.97%.