Freddie Mac reported that mortgage rates fell to an average of 7.02% this week, marking the second straight week of declines.
“A reduction in interest rates, however small, may give prospective homebuyers a little more space in their budgets,” said Sam Carter, chief economist at Freddie Mac.
Interest rates above 7% have been cited as a reason for delaying the spring home buying season. Home builders said this week that rising interest rates are straining homebuyers' budgets and causing a decline in home construction.
“While the beginning of the year saw an expansion in single-family home construction due to a lack of existing inventory, home construction activity leveled off in April as rising interest rates, tightening lending conditions and weak sentiment created headwinds for new home construction. '' said Carl Harris, president of the National Association of Home Builders. “Lower interest rates, especially for builders and developers, will allow builders to increase the pace of home construction in the coming months.”
Despite the recent easing in mortgage rates, homebuyers are not flooding into the market. The number of mortgage applications for home purchases, an indicator of future home-buying activity, fell 2% in the past week and was down 14% from a year ago, the Mortgage Bankers Association reported. The biggest setbacks have been seen in Federal Housing Administration loan applications, which tend to favor first-time buyers and low-income buyers.
“While lower interest rates are a boon for prospective homebuyers, mortgage rates are still significantly higher than they were a year ago, and inventory for sale remains low,” said Joel Kang, deputy chief economist at the Mortgage Bankers Association. It's still tight,” he said.
The average interest rate on a 30-year fixed-rate mortgage this week was 7.02%, which is about the same as a typical mortgage on a $400,000 home, assuming a 10% down payment, said Jessica Lautz, deputy chief economist at the National Association of American Associations. Monthly payments will be approximately $2,400. REALTORS®.
Mortgage interest rates have remained above 7% for five consecutive weeks. “Rising interest rates are hurting first-time homeowners and hurting affordability,” Lautz said. However, this week's inflation data showed a slight decline, which could help lower mortgage rates for spring homebuyers, Lautz added.
Freddie Mac reports the following national average interest rates for the week ending May 16:
- 30 year fixed rate mortgage: The average was 7.02%, down from last week's average of 7.09%. A year ago, the average 30-year interest rate was 6.39%.
- 15 year fixed rate mortgage: The average was 6.28%, also down from last week's average of 6.38%. A year ago, the average 15-year interest rate was 5.75%.
