Freddie Mac’s Mortgage Rates Tumble

·3 min read
Money; Getty Images
Money; Getty Images

Mortgage rates dropped this week, continuing a streak of seesawing tied to the increasingly volatile housing market. The average rate on a 30-year fixed-rate loan dropped 0.24 percentage points to 5.30%, according to Freddie Mac’s benchmark survey.

Overall, rates have increased by more than 2 percentage points since the first week of January, and have caused a chilling effect in a housing market that has been red hot for the past two years.

Freddie’s average rates for other loan types are lower as well. The average rate on a 15-year fixed-rate loan is down to 4.58%. The rate on a 5/1 adjustable-rate mortgage decreased to 4.29%.

What’s next for mortgage rates?

Mortgage rates have been unsteady over the past few weeks as concerns over the health of the U.S. economy persist.

Still, yesterday’s announcement by the Federal Reserve of an additional increase in the federal funds rate isn’t expected to have a significant impact on mortgage rates in the near future. The announcement was well-predicted, and markets have already baked in the increase, Lawrence Yun, chief economist at the National Association of Realtors, said in a statement.

It’s possible, Yun added, that rates will actually stabilize throughout the rest of the year and stay within their current range of 5.5% to 6%.

The Fed started implementing a series of rate increases in March as inflation ballooned to its highest level in 40 years. Although the Fed rate doesn’t directly influence mortgage rates, it does influence interest rates in general, including those for home loans.

Home sales slow but prices keep rising

Mortgage rates are more than 2 percentage points higher than they were during the first week of January, putting the brakes on a housing market that has been firing on all cylinders for the past two years.

“As the market adjusts to a higher rate environment, we are seeing a period of deflated sales activity until the market normalizes,” Freddie Mac’s chief economist, Sam Khater, said in a statement.

Existing home sales, based on the number of completed transactions, are 14.2% lower compared to last June and have decreased for five straight months. Meanwhile, pending home sales, based on the number of signed contracts and an indication of future closed sales, are down by 8.6% year-over-year, according to the National Association of Realtors. Many homebuyers have put their search on hold because of higher borrowing costs, so those who are still actively looking for a home are facing less competition — but still contending with sky-high listing prices.

There may soon be a shift towards a more equitably-balanced market for buyers as inventory increases and competition wanes, but for now, prices remain in favor of sellers.

During the second quarter of 2022 (which ended in June), median home prices were higher in 96% of the metropolitan areas surveyed by real estate data provider ATTOM.

As of this writing, the national median price of a U.S. home is $346,000, up $28,000 from the first quarter of 2022, and up $46,000 year-over-year.

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