As inflation eases, mortgage rates are dropping once more — a positive sign for would-be homebuyers optimistic about their chances in 2023.
“The beginning of the new year allows people to start over again and set their resolutions for the year. One of those resolutions may be buying a home,” writes Nadia Evangelou, senior economist for the National Association of Realtors.
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“This downward trend of mortgage rates gives a scrap of hope for many homebuyers for the months ahead.”
Evangelou notes that with a 6% rate, buyers would pay about $2,700 less every year on a typical mortgage, compared to a 7% rate.
“This could bring more buyers back to the market, boosting demand for housing and increasing market competition.”
30-year fixed-rate mortgages
The average 30-year home loan dropped to 6.33%, compared to last week when the average rate was 6.48%, Freddie Mac reported Thursday.
This time a year ago, the average rate was 3.45%.
“With capital market volatility expected to continue, mortgage rates will maintain a seesaw trajectory over the short term, likely staying within the 6%-7% range we have seen over the past five months,” says George Ratiu, manager of economic research at Realtor.com.
However, that doesn’t mean homebuyers can’t search for better.
“For buyers who find a home to purchase, shopping for a mortgage with multiple lenders to secure the lowest rate and fees could result not only in a lower monthly payment, but also in tens of thousands of dollars saved over the life of the loan.”
15-year fixed-rate mortgages
The average 15-year fixed rate slid to 5.52%, compared to the previous week’s rate of 5.73%.
This time last year, it was 2.62%.
“While mortgage rates have resumed their decline, the market remains hypersensitive to rate movements, with purchase demand experiencing large swings relative to small changes in rates,” says Sam Khater, chief economist at housing giant Freddie Mac.
“Over the last few weeks latent demand has been on display with buyers jumping in and out of the market as rates move.”
Read more: Here’s how much money the average middle-class American household makes — how do you stack up?
Rates may fall further as inflation slows
The consumer price index dipped slightly to 6.5% in December — down 0.1% compared to the previous month — which could pave the way for smaller rate hikes from the Fed.
Experts say this may also signal lower mortgage rates in the future.
“The 30-year mortgage rate dropping under 6% is now a distinct possibility,” writes Lawrence Yun, chief economist for the National Association of Realtors.
“The gate is beginning to open for homebuyers who got shut out in October and November when the rates went above 7%. However, there is still a housing shortage and not enough listings.”
While homes for sale are remaining on the market longer, the number of homes newly listed for sale plunged by 21% in December compared to a year prior, reports Realtor.com.
Mortgage applications inch up again
Mortgage applications increased 1.2% from last week, according to the Mortgage Bankers Association.
Refinance activity also increased by 5%. Yet refinances still only make up 30% of all applications — compared to the past decade’s average of 58% — notes Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association.
“There was an increase in refinance activity as a result of the 16-basis-point decline in rates, as both conventional and government refinance applications increased. However, the overall pace of refinance applications was lower than November and December’s 2022 averages, and over 80% lower than a year ago,” Kan says.
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Source: https://finance.yahoo.com/news/scrap-hope-mortgage-rates-fall-123000870.html