Long-term Mortgage Rates Fall, Boosting Demand for Home Purchases
FILE-A house is seen with a "For Sale" sign on it in Pasadena, California. (Photo by David McNew/Getty Images)
The long-term mortgage rates have fallen over the past week, reigniting demand for home purchases and breathing new life into what has been a stagnant housing market.
According to the Mortgage Bankers Association (MBA), mortgage applications jumped 6.3% overall from the week before, driven by an increase in purchase demand, which was up 52% from a year ago.
The surge in purchase applications comes as mortgage rates fell for the first time in two months, MBA noted. Still, the decline in rates was only slight, and the affordability crisis continues to drag heavily on the housing market.
Freddie Mac’s Primary Mortgage Market Survey
Freddie Mac’s latest Primary Mortgage Market Survey, also released on Wednesday, showed that the average rate on the benchmark 30-year fixed mortgage dropped to 6.81% from last week’s reading of 6.84%. The average rate on a 30-year loan was 7.22% a year ago.
"The 30-year fixed-rate mortgage moved down this week, but not by much," said Sam Khater, Freddie Mac’s chief economist. "Rates have been relatively flat over the last few weeks as the market waits for more clarity on specific economic policies."
Market Analysis
"Potential homebuyers are also waiting on the sidelines, causing demand to be lackluster," Khater added. "Despite the low sales activity, inventory has only modestly improved and remains dramatically undersupplied."
Many would-be buyers and sellers are holding out to see if rates fall further. Currently, about 80% of mortgage holders have a rate below 5%, according to a Zillow survey.
15-Year Fixed Mortgage Rate
The average rate on the 15-year fixed mortgage rose to 6.10% from 6.02% last week. One year ago, the rate on the 15-year fixed note averaged 6.56%.
Conclusion
The slight decline in mortgage rates has boosted demand for home purchases, but the affordability crisis remains a significant challenge for the housing market. Potential buyers and sellers are holding out to see if rates fall further, and inventory remains undersupplied.
FAQs
Q: What is the current average rate on the 30-year fixed mortgage?
A: The current average rate on the 30-year fixed mortgage is 6.81%.
Q: How has the mortgage rate changed over the past year?
A: The average rate on a 30-year loan was 7.22% a year ago.
Q: Why are mortgage rates still relatively flat?
A: Mortgage rates have been relatively flat over the past few weeks as the market waits for more clarity on specific economic policies.
Q: What is the current inventory situation in the housing market?
A: Despite low sales activity, inventory has only modestly improved and remains dramatically undersupplied.
Q: What percentage of mortgage holders have a rate below 5%?
A: About 80% of mortgage holders have a rate below 5%, according to a Zillow survey.