Mortgage Rate Trends: Loans Near 6% Unleash Horde Of Homebuyers, And Lower Rates Could Be On The Way — But Economists Warn Consumers Are ‘not invincible’

Mortgage Rate Trends: Loans Near 6% Unleash Horde Of Homebuyers, And Lower Rates Could Be On The Way — But Economists Warn Consumers Are ‘not invincible’

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Mortgage Rate Trends: Loans Near 6% Unleash Horde Of Homebuyers, And Lower Rates Could Be On The Way — But Economists Warn Consumers Are ‘not invincible’

Inflation may be slowing, but other factors threaten to push affordability further out of reach.

Refusing to let a good opportunity pass them by, a wave of homebuyers pulled the trigger this week as mortgage rates slipped closer and closer to the 6% mark.

“Rates are at their lowest level since September of last year, boosting both homebuyer demand and homebuilder sentiment,” writes Sam Khater, chief economist at housing giant Freddie Mac.

At the same time, analysts warn that buyers who have not yet made their move will need to keep their eye on the swings of this unstable economy, as mortgage rates are far from the only factor affecting affordability.

More: Is now a good time to buy a house?

Mortgage rates this week

30-year fixed-rate mortgages

The average 30-year fixed rate tumbled further to 6.15% this week, compared to last week’s 6.33%. A year ago at this time, the rate averaged 3.56%.

“With the Fed tightening its monetary policy, the U.S. housing market has been under significant pressure. While our 2023 forecast anticipates ongoing inflation causing upward pressure on rates, recent favorable data has helped to pull mortgage rates down,” says economist Jiayi Xu.

“As the economy weathers the easing in inflation, mortgage rates may continue to fluctuate in the short term, within the 6%-7% range that we have seen over the past five months.”

Of course, Xu acknowledges, mortgage rates still remain incredibly high compared to last year, creating “financial barriers” for many buyers.

15-year fixed-rate mortgages

The average rate on a 15-year home loan dropped from 5.52% down to 5.28% this week. This time a year ago, the 15-year fixed-rate was 2.79%.

Nadia Evangelou, senior economist for the National Association of Realtors, believes rates may fall even further.

“The fall in mortgage rates creates opportunities for many buyers,” says Evangelou.

“A lower mortgage rate brings down the monthly payment. Since rates’ recent peak in the middle of November, buyers can save about $300 every month with rates near 6%.”

Mixed economic data keeps analysts wary

The latest government data indicates inflation slid from 7.1% in November to 6.5% in December. At the same time, U.S. retail sales for December posted their biggest drop in 12 months, signaling weakened consumer demand.

Savings are at a near-record low and consumers are increasingly relying on their credit cards, putting homeownership further out of reach of many Americans.

“Although the slower inflation rate in December is a positive sign, concerns from businesses and investors about economic growth continue to rise as weaker retail sales data remind us that the U.S. consumer is not invincible,” writes Xu.

Xu notes that while “nationwide unemployment remained at long-term lows” in December, the tech industry in particular has been reporting thousands of layoffs.

Mortgage applications surge

Demand for mortgages leapt 27.9% from last week, according to the Mortgage Bankers Association (MBA).

“Mortgage application activity rebounded strongly in the first full week of January, with both refinance and purchase activity increasing by double-digit percentages compared to last week, which included the New Year’s holiday observance,” says Mike Fratantoni, senior vice president and chief economist at the MBA.

“As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers.”

Refinance activity also shot up by 34%, although this is still 81% lower compared to the same period last year.


Author: Serah Louis


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