In a promising turn of events for prospective homebuyers, the average long-term U.S. mortgage rate has recently reached its lowest level since May, providing a glimmer of relief amid the challenges posed by soaring home prices and fierce market competition.
Freddie Mac reported a drop in the average rate on a 30-year mortgage to 6.6%, down from 6.66% the previous week. This marks the lowest level since late May when the rate was at 6.57%. Notably, a year ago, the rate stood at 6.15%.
The positive trend isn’t exclusive to 30-year mortgages; borrowing costs on 15-year fixed-rate mortgages also saw a decline, with the average rate falling to 5.76% from 5.87% in the previous week. A year ago, it was at 5.28%.
Sam Khater, Chief Economist at Freddie Mac, expressed optimism about the development, especially for first-time homebuyers sensitive to changes in housing affordability. However, Khater also highlighted potential challenges, stating, “As purchase demand continues to thaw, it will put more pressure on already depleted inventory for sale.”
The drop in mortgage rates has been a consistent trend since late October when the average rate on a 30-year mortgage surged to 7.79%, the highest since late 2000. While the current rate is notably higher than two years ago (3.56%), the decline since the fall of last year is seen as positive news for homebuyers, enhancing their purchasing power amidst rising home prices.
This decline in rates aligns with a decrease in the 10-year Treasury yield, influencing how lenders price loans. As the yield has come down, hopes rise that inflation has cooled sufficiently for the Federal Reserve to consider cutting interest rates in 2024.
Despite the overall positive outlook, there remains uncertainty about the frequency and timing of potential rate cuts by the Federal Reserve. Economists anticipate that, if rates continue to ease, it could stimulate demand leading into the spring homebuying season, traditionally commencing in late February.
While economists generally predict that the average rate on a 30-year mortgage won’t dip below 6%, the current trend suggests a favorable environment for homebuyers in the coming months. As the real estate market adjusts to these changes, prospective buyers may find this period to be an opportune time to enter the market and secure their dream homes.
Source: Yahoo Finance
