Mortgage interest rates inch closer to 6%
Compared to November's peak, today's rates could allow millions of additional buyers to afford a home.
Key points:
- The average rate this week is 6.09%, nearly a point lower than the peak rate of 7.08% in late October and early November.
- The mortgage rate continued to decline even with the Federal Reserve raising interest rates on Feb. 1.
- While mortgage rates have trended down, mortgage applications also slowed, a sign that it is still a volatile period in the market.
Mortgage interest rates continued trending closer to the 6% level, welcome news for buyers getting ready for the spring homebuying season.
The 30-year fixed-rate mortgage survey from Freddie Mac puts the average at 6.09%, down from last week's 6.13%. It's the fourth consecutive week of declines after rates climbed in December.
"Mortgage rates inched down again, with the 30-year fixed-rate down nearly a full point from November, when it peaked at just over seven percent," said Sam Khater, Freddie Mac's chief economist. "According to Freddie Mac research, this one percentage point reduction in rates can allow as many as three million more mortgage-ready consumers to qualify and afford a $400,000 loan, which is the median home price."
Mortgage rates dropped even after the Federal Reserve raised interest rates on Feb. 1, a move anticipated by many economists in the week leading up to the Federal Open Market Committee meeting.
"Higher short-term rates generally push long-term rates up. But because the risk of recession has increased, longer-term rates like 10-year treasury bonds and 30-year fixed mortgage rates are falling," said Orphe Divounguy, senior macroeconomist at Zillow Home Loans. "Upcoming releases on wage growth, the services industry and inflation expectations are likely to keep mortgage rates volatile, but additional signs of weakness in economic data should continue to apply downward pressure."
Given the recent actions from the Federal Reserve, mortgage rates should remain around 6% for the coming weeks, said George Ratiu, Realtor.com's senior economist and manager of economic research.
"In effect, the Fed's actions are keeping a floor under mortgage rates for the short term," Ratiu said.
Going forward, Ratiu expects economic data to help determine where mortgage rates go next. He noted that the most recent jobs report points to an economy that is still resilient.
Even with the declining mortgage interest rates, applications were down 9% from a week earlier, according to the Mortgage Bankers Association.
"Overall application activity declined last week despite lower rates, which is an indication of the still volatile time of the year for housing activity," said Joel Kan, MBA's vice president and deputy chief economist. "Purchase activity is expected to pick up as the spring homebuying season gets underway, bolstered by lower rates and moderating home-price growth. Both trends will help some buyers regain purchasing power."
The 15-year fixed-rate mortgage was also down slightly for the week, coming in at 5.14%. Last week it averaged 5.17%, but is still much higher than a year ago when it was at 2.77%.