As economists predicted, the 30-year fixed rate fell again this week, moving closer to 6%.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.09%, down from 6.13% the week prior.
A year ago at this time, the 30-year FRM averaged 3.55%.
The 15-year fixed-rate mortgage fell from 5.17% to 5.14%. A year ago, it averaged 2.77%.
“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.”
A buyer with a $2,500 monthly budget can afford about $35,000 more now than they could have when rates were at 7%.
Rates may continue to trend down as the Fed eases rate hikes.
The FOMC raised the benchmark rate by a quarter point this week, down from the 50 and 75 BPS increases of most of last year. On February 2, the average mortgage rate slipped below 6% for the first time since a brief cooldown in September, and not consistently since August.
“It’s clear that the Federal Reserve has already switched to smaller rate hikes as inflation is easing,” Nadia Evangelou, director of real estate research at the National Association of Realtors, said in a statement.
She predicted that mortgage rates may slip below the 6% threshold.
But while the lower increase reflects easing inflation, Federal Reserve Chair Jerome Powell emphasized that he does not see them cutting rates any time soon.
“We will stay the course until the job is done,” Powell said. “Certainty is just not appropriate here. Inflation, it’s just hard to forecast inflation. It may come down faster. It may take longer to come down, and yet, our job is to deliver inflation back to target and we will do that, but I think we’re going to be cautious about declaring victory and sending signals that we think that the game is won because we’ve got a long way to go. It’s the early stages of disinflation,” Powell said.
Powell said it is their job to restore price stability and achieve 2% inflation for the benefit of the American people.
“We are strongly resolved that we will complete this task because we think it has benefits that will support economic activity and benefit the public for many, many years,” Powell said.
Mortgage rates follow the yield on 10-year treasury bonds, not the federal rate. But other home loans like HELOCs and adjustable-rate mortgages are tethered to the Fed’s moves and may see increases as a result of the hike.
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— The Mortgage Note (@TheMortgageNote) February 2, 2023
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