Mortgage Rates See Largest Monthly Decline Since 2008

Mortgage rates have fallen every week for the past month, with the average rate on the 30-year fixed mortgage retreating further to 6.65%. Borrowing costs dipped across all fixed-rate mortgage products, including FHA loans, VA loans and 30-year jumbo loans. Meanwhile, adjustable mortgage rates stayed relatively stagnant.

Here are the current average mortgage rates, without discount points unless otherwise noted, as of Dec. 8:

30-year fixed: 6.65% (down from 6.84% a week ago).

20-year fixed: 6.53% (down from 6.7% a week ago).

15-year fixed: 5.98% (down from 6.13% a week ago).

10-year fixed: 6.03% (down from 6.18% a week ago).

5/1 ARM: 5.43% (down from 5.46% a week ago).

7/1 ARM: 5.57% (down from 5.61% a week ago).

10/1 ARM: 6.01% (up from 5.99% a week ago).

30-year jumbo loans: 6.66% (down from 6.85% a week ago).

30-year FHA loans: 5.96% with 0.07 point (down from 6.04% a week ago).

VA purchase loans: 6.06% with 0.05 point (down from 6.11% a week ago).

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[Read: Best Mortgage Lenders.]

“Mortgage rates decreased for the fourth consecutive week, due to increasing concerns over lackluster economic growth. Over the last four weeks, mortgage rates have declined three quarters of a point, the largest decline since 2008. While the decline in rates has been large, homebuyer sentiment remains low with no major positive reaction in purchase demand to these lower rates.”

— Sam Khater, Freddie Mac’s chief economist, in a Dec. 8 statement

Despite their lack of optimism, prospective buyers are in a window of opportunity to leverage stagnant homebuying activity for seller concessions, all while mortgage rates are steadily declining. Now could be the time to lock in a relatively good rate — especially when you consider that mortgage rates will likely stay elevated in the near future. Fannie Mae’s latest forecast

suggests that the 30-year fixed mortgage rate will be around 7% throughout the first two quarters of 2023.

During the past month, the average rate for this popular home loan product has plunged from 7.33% to 6.65%. And although today’s mortgage rates sound like a sour deal compared with the sub-3% rates of 2021, minor rate fluctuations can meaningfully impact a loan’s monthly payments and lifetime borrowing costs.

Take this example: The monthly principal and interest payment on a $300,000 mortgage would be $2,062 at a 7.33% mortgage rate, compared with $1,925 at the current rate of 6.65%. And during the entire course of repayment, you’d save nearly $50,000 in interest charges by locking in a lower rate today.

Plus, in a lukewarm housing market with dwindling competition, sellers may be compelled to offer unconventional concessions such as interest rate buydowns. While the buyer typically pays for mortgage discount points to reduce the interest rate, it may be possible to negotiate a seller-paid buydown. Explore your options with your real estate agent and mortgage lender to determine if this strategy is worthwhile.

[Compare: Mortgage and Refinance Rates in Your Area.]

Indicator of the Week: Top Housing Markets for First-Time Homebuyers

The real estate marketplace Zillow has released its annual ranking of the best cities for first-time homebuyers, identifying the top 10 U.S. housing markets that are more affordable and less competitive than the rest.

Wichita, Kansas, is the No. 1 metro area for first-time homebuyers in 2023, followed by a slew of Rust Belt cities: Toledo, Ohio (No. 2); Syracuse, New York (No. 3); Akron, Ohio (No. 4); Cleveland (No. 5); Detroit (No. 7) and Pittsburgh (No. 8). Other central-U.S. metros Tulsa, Oklahoma (No. 6); St. Louis (No. 9); and Little Rock, Arkansas (No. 10), rounded out the list of best cities for buying a first home.

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“Affordability remains the No. 1 challenge for first-time homebuyers,” Amanda Pendleton, Zillow’s home trends expert, says in the report. “If they can overcome that significant hurdle, aspiring buyers have a better chance of landing a home than they’ve had in several years. They have more options, more time to decide and more negotiating power, meaning they may be able to land their dream home at a discount.”

Zillow compiled a number of data points to determine the top metro areas for first-time homebuyers, including the typical home value, the percentage of income spent on mortgage payments, the share of listings with a price cut and the inventory-to-buyer ratio. Here’s how some of the featured markets ranked compared with the country as a whole:

Best For Typical Home Value Income Spent on Monthly Mortgage (%) Homes for Sale Per Buyer, Estimated Share of Listings With a Price Cut
U.S. Average $358,423 47% 6 27%
Wichita, Kansas Inventory-to-buyer ratio $199,461 32% 22 22%
Toledo, Ohio Home values, payment-to-income ratio $172,710 26% 5 23%
Akron, Ohio Reduced-price listings $211,069 28% 5 29%

[READ: How to Get Approved for a Mortgage]

In Wichita, the estimated inventory-to-buyer ratio is a whopping 22-to-1, meaning that for every prospective buyer, there are 22 homes for sale. To put that into perspective, the national average is six home listings per buyer. With weak demand and abundant supply, homebuyers in Wichita may find the opportunity to bid well under the list price or obtain other concessions like seller-paid rate buydowns.

Homeowners in runner-up Toledo spend the smallest percentage of their paychecks on monthly mortgage payments, at just 26%. That’s in contrast to the average payment-to-income ratio of 47% among homeowners nationwide. Toledo also has the lowest prices, with the typical home valued at $172,710, which is less than half the typical U.S. home value of $358,423.

When it comes to the share of homes with price cuts, a few metros stand out: Akron (29%), Detroit (28%) and Pittsburgh (28%). In these cities, the percentage of reduced-price listings outpaces the national average of 27%.

If I can be so bold as to make a suggestion, consider my hometown Pittsburgh if you’re ready to buy your first house in a new city. Not only can you get a fantastic deal on a charming single-family home, but you’ll also have access to world-class universities, the timeless Kennywood amusement park and some of the finest Italian-American food to ever grace your palate.

Insider tip: Check the basement to see if your dream home has an enigmatic Pittsburgh toilet.

More from U.S. News

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Mortgage Rates Retreat Below 7%

Mortgage Rates See Largest Monthly Decline Since 2008 originally appeared on usnews.com

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