Real Estate News
LOS ANGELES (AP) — The average rate of interest on 30-year mortgages fell again this week, continuing a welcome trend for prospective homebuyers faced with record-high housing prices.
The rate of interest fell from 6.87 percent the previous week to six.86 percent, said mortgage buyer Freddie Mac on Thursday. A yr ago, the rate of interest averaged 6.71 percent. Five years ago, in line with the Federal Reserve Bank of St. Louis.
This is the fourth consecutive weekly decline within the rate of interest, which has mostly hovered around 7 percent this yr. Home sales have been falling in recent months because the increased rates of interest, which may add tons of of dollars to borrowers' costs every month, have deterred many homebuyers.
Sales of used U.S. homes fell for the third consecutive month in May. Sales of newly built single-family homes fell 7.7 percent and 16.5 percent in April and May, respectively, in comparison with a yr earlier.
“The 30-year fixed-rate mortgage continues to trend lower, reaching its lowest level in nearly three months,” said Sam Khater. Freddie MacChief Economist of. “By historical standards, the economy is in good shape and we expect interest rates to continue to fall in the summer months, bringing more home buyers back into the market.”
Mortgage rates are influenced by several aspects, including the bond market's response to the Federal Reserve's rate of interest policy and the trend within the 10-year Treasury yield, which lenders use as a guide for pricing home loans.
The yield, which was above 4.7 percent at the tip of April, has mostly fallen recently after some economic data showed slower growth, which could help contain inflationary pressures and The US Federal Reserve to start cutting the important thing rate of interest from its highest level in greater than 20 years.
Earlier this month, Fed officials said inflation had moved closer to their 2 percent goal in recent months and signaled they’d cut their benchmark rate of interest once this yr. The central bank had previously forecast up to 3 rate cuts in 2024, raising expectations within the housing market that mortgage rates would have fallen further by now.
With just one rate cut expected by the tip of the yr, “the relief may come too little and too late for many first-time home buyers,” said Jiayi Xu, economist at Realtor.com.
“For home buyers and sellers, mortgage rates are likely already at their peak, but the risk of volatility remains, making relocation decisions difficult,” Xu noted.
As rates of interest have fallen in recent weeks, the monthly payments that homebuyers are willing to pay when applying for a mortgage have also fallen.
The average monthly rate reported in mortgage applications in May was $2,219, down 1.6 percent from the previous month but 2.5 percent greater than May of the previous yr, in line with the Association of Mortgage Banks.
MBA predicts that mortgage rates will fall to just about 6.5 percent by the tip of this yr.
However, this may increasingly not be enough to encourage homeowners who bought or refinanced at rates of interest below 4 or three percent to sell, since nearly 90 percent of mortgaged homes have rates of interest of six percent or less.
Meanwhile, mortgage rates rose this week on 15-year fixed-rate loans, popular with homeowners refinancing their mortgages. They averaged 6.16 percent this week, compared with 6.13 percent the week before. A yr ago, the common was 6.06 percent, Freddie Mac said. Five years ago, it averaged 3.16 percent, in line with the Federal Reserve Bank of St. Louis.
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