House with arrow going slightly down with percentage sign
Illustration by Lanette Behiry/Real Estate News

Mortgage interest rates fall for a second week 

Rates dropped to 6.42% this week, down significantly from 6.73% just two weeks ago, which could give buyers a window to act.

March 23, 2023
3 minutes

Key points:

  • Uncertainty in the banking sector along with Fed actions are likely influencing mortgage rates.
  • Rates could continue to drop if the market sees signs of inflation easing.
  • Affordability, low inventory are still barriers for buyers, but lower rates may spur more interest this spring.

Against a backdrop of financial market turmoil and signs that the weakening economy will finally cool off inflation, mortgage rates took a nosedive.

The 30-year fixed-rate mortgage came in this week at 6.42%, according to the latest Freddie Mac survey. That's down significantly from last week's 6.6%; two weeks ago, the average rate was even higher at 6.73%.

Lower mortgage rates could be good news for buyers as the spring home shopping season gets underway.

"On the homebuyer front, the news is more positive with improved purchase demand and stabilizing home prices," said Sam Khater, Freddie Mac's chief economist. "If mortgage rates continue to slide over the next few weeks, look for a continued rebound during the first weeks of the spring homebuying season."

Mortgage rate fluctuations reflect the turmoil from high-profile bank failures and dropping 10-year treasury bills, which knocked down interest rates. But rates could be on the rise again after the Federal Reserve decided on March 22 to raise benchmark interest rates another quarter point, said Bright MLS Chief Economist Lisa Sturtevant.

"Higher rates could mean more price drops in the months to come, but don't expect prices to fall dramatically. Low inventory continues to limit buyers' leverage and sellers still have the upper hand in most markets," Sturtevant said.

In its daily rate survey, Mortgage News Daily put the 30-year mortgage at 6.44% on Thursday morning. Matthew Graham, chief operating officer at MND, pointed to the comments by Fed Chairman Jerome Powell on Wednesday as a factor. Powell spoke about potential credit tightening, which could bring down inflation more quickly.

"It remains to be seen if this is a temporary sigh of relief or a sign of things to come," Graham said in a post on the MND website. Economic Data Analyst Hannah Jones noted that homebuyers are looking for that optimal combination of prices and mortgage rates, with each downward tick in mortgage rates being met with increased buyer demand.

"However, elevated rates and high prices mean that point doesn't yet exist in the market for many would-be buyers," Jones said. "At the current price and mortgage rate level, the typical housing payment on a median-priced home is still 36.4% higher than one year ago."

With the recent drop in rates, mortgage applications continued to climb, rising 3% in the past week according to the Mortgage Bankers Association. Applications are still down 68% compared to a year ago.

The 15-year mortgage fixed-rate mortgage rate also dropped, coming in at 5.68% this week. That's down from 5.9% a week ago.

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