Home News Mortgage rates ticked lower, but are still well above 5%

Mortgage rates ticked lower, but are still well above 5%

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According to Freddie Mac, 30-year fixed-rate mortgages averaged 5.25% for the week to May 19, down from 5.30% last week. It’s still well above the 3% average since this time last year.

“Economic uncertainties are causing fluctuations in mortgage rates,” said Sam Carter, Freddie Mac’s chief economist. “As a result, demand for purchases has weakened and homebuilder sentiment has fallen to its lowest level in nearly two years. Builders are also coping with rising costs, and this stance is likely to continue.” ..

As a result of rising interest rates, housing funding costs have risen significantly for buyers since last year.

In May 2021, a 30-year fixed-rate mortgage loan with an average interest rate of 3% for a buyer who loaned 80% of the purchase price for $ 300,000 and a monthly mortgage payment of principal and interest of $ 1,267. bottom. Freddie Mac.

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Today, an average of 5.25% homeowners on the same loan will pay $ 1,660 a month in principal and interest. According to Freddie Mac figures, this is $ 393 a month, $ 4,716 a year, and $ 141,480 more during the loan period.

For many, that additional $ 400 a month is the difference between buying a home and building a stock or continuing to rent it.

Mortgage rates can stay at these levels or rise as long as the Federal Reserve is still working to stop inflation. Federal Reserve Chair Jerome Powell said the central bank will continue to raise interest rates until sound price targets are met.

Mortgage rates tend to track 10-year US Treasury bonds, but they can also be indirectly affected by the Fed’s actions on inflation. Yields on 10-year Treasuries have fluctuated this week as investors sought stability in a series of difficult economic data.

“The Federal Reserve’s monetary tightening has the intended effect of cooling housing demand and is helping to initiate market normalization,” said Hannah Jones, an economic data analyst at Realtor.com. rice field.

This is already seen in the housing market, even though prices continue to rise. Redfin reports less bidding wars and more homes for sale compared to this time last year.

Both developments are welcome news for future buyers, according to Jones, but rising home prices are driving many home seekers out of the market.

If she decides to find a new home, pay a large down payment to reduce the amount she rents, or look far away from the target area to find a more affordable home, and she will be most successful. said. ..

“But for buyers who can’t keep up with higher prices and rising mortgage rates, high inflation and rent prices still provide little relief,” Jones said.

Correction: Earlier versions of this story were in the wrong direction for rates. This week’s average mortgage rate fell from 5.30% last week.

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