The interest rate for a 30-year loan is nearly a whole percentage point down from a 7.08% peak just two months ago.
Affordability woes are still spooking buyers, but another decrease in mortgage rates could bring them back to the market. The interest rate for the 30-year mortgage averaged 6.13% this week, Freddie Mac reports, nearly a whole percentage point drop from a 7.08% peak just two months ago. This could boost homebuyer confidence and help dig the real estate market out of a “housing recession.” To boot, mortgage applications for home purchases have been inching up, rising 3% last week, the Mortgage Bankers Association reports.
“Homebuying activity remains tepid, but if rates continue to fall and home prices cool further, we expect to see potential buyers come back into the market,” says Joel Kan, an MBA economist. “Many have been waiting for affordability challenges to subside.”
Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, says that mortgage rates could fall even further in the weeks ahead as investors anticipate the Federal Reserve’s next move. The Fed plans to vote for a smaller rate hike at its meeting next week due to signs of easing inflation. “A stronger housing market could help the U.S. economy skirt a recession,” Evangelou adds.
Meanwhile, ever since the start of this year, mortgage rates have continued to trickle down. “As a result, home purchase demand is thawing from the monthslong freeze that gripped the housing market,” says Sam Khater, Freddie Mac’s chief economist. “Potential home buyers remain sensitive to changes in mortgage rates, but ample demand remains, fueled by first-time home buyers.”
Also, Evangelou notes that consumers seem to be accepting that historically low 3% rates in recent years aren’t likely coming back anytime soon. As rates see less fluctuation, more buyers will likely re-emerge onto the housing market.
Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 26:
- 30-year fixed-rate mortgages: averaged 6.13%, falling from last week’s 6.15% average. Last year at this time, 30-year rates averaged 3.55%.
- 15-year fixed-rate mortgages: averaged 5.17%, dropping from last week’s 5.28% average. A year ago, 15-year rates averaged 2.80%.