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Suddenly, a 5.3 percent mortgage seems low.
That was the average rate on a 30-year, fixed-rate mortgage this week, the Wall Street Journal reported. The average rate was a significant drop from last week, when Freddie Mac had the average rate at 5.7 percent, and mid June, when it surpassed 6 percent.
Still, it is much higher than at the beginning of the year, when homeowners enjoyed an average rate of 3.22 percent.
Last week’s decline was the second straight for Freddie Mac’s average mortgage rate — a relief for homebuyers who had seen rates more than double since earlier in the pandemic.
“Because of falling mortgage rates, homes may be more affordable than they were three weeks ago,” NerdWallet senior writer Holden Lewis said in a statement.
While the drop in rates may lure more buyers back into the market, the reason for the rate drops is a significant cause for concern.
Rates are tied to yields for the benchmark 10-year U.S. Treasurys. Those yields recently dropped to their lowest level in more than a month and may continue to drop as recession fears prompt investors to seek safety.
Mortgage rates have been on a roller coaster in recent weeks following the Federal Reserve’s interest rate hike. Prior to the pandemic, the average rate hovered around 4 percent. The rate mostly hovered between 2 and 3 percent from 2020 into 2021, then began climbing over the winter.
Rising mortgage rates are only one factor limiting home sales. The market has also been beset with incredibly low inventory, keeping deals down and prices up.
All of these factors have resulted in one of the most challenging periods in recent memory for homebuyers. In May, housing affordability dropped to a 15-year low, according to a report from Zillow. In April, monthly mortgage payments typically required 28 percent of homeowners’ income; 30 percent is considered burdensome.
Mortgage payments reportedly exceeded rent payments in all but five states.
[WSJ] — Holden Walter-Warner
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