Lower Mortgage Rates Boost Buyer Demand

As mortgage rates settle into the 6% range—the 30-year fixed rate loan averaged 6.66% this week, according to Freddie Mac—home buyers appear to be gradually returning to the market. Mortgage applications for home purchases, which is a gauge of future home sales activity, rose about 6% last week, the Mortgage Bankers Association reports. And Americans are feeling more optimistic about mortgage rates falling even further over the next year, according to Fannie Mae’s latest consumer survey.

“A more optimistic rate outlook among consumers may signal an expectation that home affordability pressures will ease in 2024,” says Mark Palim, deputy chief economist at Fannie Mae. “Homeowners have told us repeatedly of late that high mortgage rates are the top reason why it’s both a bad time to buy and sell a home. So, a more positive mortgage rate outlook may incent some to list their homes for sale, helping increase the supply of existing homes in the new year.”

Mortgage rates are about a full percentage point lower than they were in October.

Home buyers may be shopping with greater confidence, as lower mortgage rates enable them to better plan their budgets, says Jessica Lautz, deputy chief economist at the National Association of REALTORS®. “Potential buyers know the homes they view are within their price range without any expected large swings” in rates like last fall, she says.

A $400,000 home—the median price nationwide—translates to a $2,056 monthly mortgage payment (assuming a 20% down payment) at today’s rate averages, Lautz says.

“While more buyers are expected to enter the market in spring as mortgage interest rates decline, bidding wars could intensify in a limited housing inventory environment,” Lautz says. “These bidding wars are likely to push home prices up in some areas. Even last year, as mortgage interest rates were higher and there were fewer buyers, the most difficult tasks for home buyers was finding the right home. REALTORS® play a critical role in helping buyers with negotiations and in finding the buyer the right home.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 11:

• 30-year fixed-rate mortgages: averaged 6.66%, rising from last week’s 6.62% average. A year ago, 30-year rates averaged 6.33%.
• 15-year fixed-rate mortgages: averaged 5.87%, falling slightly from last week’s 5.89% average. Last year at this time, 15-year rates averaged 5.52%.