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Mortgage rates see largest decline since 2008

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According to Freddie Mac, 30-year fixed-rate mortgages averaged 5.30% for the week to July 7, down from 5.70% last week. Still, it’s significantly higher than last year’s 2.90%.

Interest rates soared at the beginning of the year, hitting a high of 5.81% in mid-June. But since then, financial concerns have pushed them down. The drop of 40 basis points offset some of the significant rate hikes in May and June.

“In the last two weeks, concerns about a potential recession have continued to rise, and fixed-rate mortgages for 30 years have fallen 0.5%,” said Sam Carter, chief economist at Freddie Mac. rice field.

However, the margin to buy a house remains an issue. Joel Berner, a senior economic research analyst at Realtor.com, said mortgage rates have been at their highest levels since the late 2000s, with listing prices rising more than 8.5% year-on-year for 24 consecutive months.

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If there is a silver lining for homebuyers, he said, it means more homes are on the market. In June, the active list grew with the highest annual growth rate in Realtor.com’s data history.

“As more homes are on the market, sellers are forced into price competition,” he said. “The cost of lending to homes remains high compared to recent years, but as the overheated housing market begins to cool, buyers will have more opportunities to find homes in their price range.”

Higher rates are also holding back demand among future buyers. According to the Mortgage Banking Association, mortgage applications fell 5.4% from the previous week in the week leading up to July 1.

“Interest rates are still significantly higher than they were a year ago, so home purchase and refinancing applications remain sluggish,” said Joel Kang, vice president of economic and industrial forecasting at the MBA. “Purchasing activities are hampered by ongoing affordable challenges and low inventories, and homeowners are still reducing their incentives to apply for refinancing.”

Inflation makes up the bulk of income, and the cost of borrowing reduces purchasing power, making it difficult for buyers to buy a home.

A year ago, a buyer who reduced a home with an average price of $ 390,000 by 20% and financed the rest with an average of 2.90% on a 30-year fixed rate mortgage had a monthly mortgage payment of $ 1,299. Freddie Mac.

Today, homeowners who buy a home of the same price at an average of 5.30% will pay $ 1,733 per month in principal and interest. That’s $ 434 more every month.

This week’s mortgage rate decline follows the recent volatility of 10-year Treasury yields, which fell below 2.8% in the first week of July after spending most of June above 3%.

The Federal Reserve does not set interest rates for borrowers to pay directly on mortgages, but their behavior affects them. Mortgage rates tend to track 10-year US Treasury bonds. When investors see or anticipate rate hikes, they often sell government bonds. It sends higher yields, along with mortgage rates.

In addition, continued concerns about our heading into a bear market are driving investors to safer, longer-term bonds, Berner said.

“This reversal may sound ominous, especially in the midst of sustained inflation agreed upon by both the market and the Fed, which will require more federal funds rate hikes to tame. It is not yet known if market conditions will lead to higher unemployment, or the decline in production that characterizes the recession, “he said.

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