Recent bank failures are creating economic panic, but there may be a silver lining for home buyers.
Mortgage rates, which have risen more than half a percent over the last five weeks, fell this week amid fears about the sturdiness of the nation’s banking industry. Silicon Valley Bank and two others that primarily support the technology industry shuttered operations, sending shock waves through the U.S. economy.
The 30-year fixed-rate mortgage decreased to 6.6% this week, Freddie Mac reports. That means most Americans can afford to buy a median-priced home and spend less than 25% of their gross income on their monthly mortgage payment—a gauge for measuring affordability—says Nadia Evangelou, senior economist and director of real estate research at the National Association of REALTORS®.
“Rates may decrease even further in the coming weeks, depending on reactions in the financial market and the outcome of the Fed’s meeting next week,” Evangelou adds. The Federal Reserve meets next week to decide the trajectory of its short-term benchmark interest rate and whether to continue or pull back on aggressive hikes.
Mortgage rates largely follow the course of 10-year Treasury yields, which have been falling ever since the announcement of the closures of Silicon Valley Bank, Signature Bank and Silvergate Capital.
“Turbulence in the financial markets is putting significant downward pressure on rates, which should benefit borrowers in the short-term,” says Sam Khater, Freddie Mac’s chief economist. “During times of high mortgage rate volatility, home buyers would greatly benefit from shopping for additional rate quotes.”
Freddie Mac’s research shows that home buyers could potentially save $600 to $1,200 annually by taking the extra time to shop and collect quotes from multiple lenders.
Freddie Mac reports the following national averages with mortgage rates for the week ending March 16:
- 30-year fixed-rate mortgages: averaged 6.6%, dropping from last week’s 6.73% average. Last year at this time, 30-year rates averaged 4.16%.
- 15-year fixed-rate mortgages: averaged 5.9%, dropping from last week’s 5.95% average. A year ago, 15-year rates averaged 3.39%.