Mortgage rates dipped slightly for the second consecutive week as banking-sector turmoil caused the Federal Reserve to hike interest rates at a more moderate pace than previously expected. The average 30-year fixed mortgage rate pulled back to 7%, while rates on most other fixed long-term and adjustable-rate mortgages continued to decline.
Here are the current mortgage rates, without discount points unless otherwise noted, as of March 23:
— 30-year fixed: 7% (down from 7.04% a week ago).
— 20-year fixed: 6.78% (down from 6.85% a week ago).
— 15-year fixed: 6.2% (down from 6.27% a week ago).
— 10-year fixed: 6.25% (up from 6.2% a week ago).
— 5/1 ARM: 5.71% (down from 5.78% a week ago).
— 7/1 ARM: 5.86% (down from 5.91% a week ago).
— 10/1 ARM: 6.14% (down from 6.16% a week ago).
— 30-year jumbo loans: 7.06% (down from 7.09% a week ago).
— 30-year FHA loans: 6% with 0.06 point (down from 6.15% a week ago).
— VA purchase loans: 6.21% with 0.05 point (down from 6.37% a week ago).
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“Mortgage rates continued to slide down as financial market concerns came to the fore over the last two weeks. However, on the homebuyer front, the news is more positive with improved purchase demand and stabilizing home prices. If mortgage rates continue to slide over the next few weeks, look for a continued rebound during the first weeks of the spring homebuying season.”
— Sam Khater, Freddie Mac’s chief economist, in a March 23 statement
Mortgage interest rates retreated for the second consecutive week on the heels of the latest Federal Open Market Committee meeting, during which policymakers raised the federal funds rate by a smaller-than-expected 25 basis points and signaled that the central bank may soon end its rate-hike program.
At a March 22 news conference following the FOMC meeting, Fed Chairman Jerome Powell also expressed concern that lenders may tighten credit conditions as a result of turmoil in the banking sector. This could have a number of implications. For one, stricter lending standards may keep mortgage rates from falling dramatically in the near term, says Orphe Divounguy, senior economist at Zillow, in a research note.
“For borrowers, lending standards were already quite strict, and tighter conditions may make it more difficult for some home shoppers to secure funding,” says Divounguy. “In turn, for home sellers, the time it takes to sell could increase.”
Looking forward, however, tighter credit could potentially help curb inflation, and slower economic growth is expected to bring mortgage rates down in the coming months. The Fed will be keeping an eye on credit conditions in addition to price stability when making future policy decisions — including whether to continue raising rates.
[Compare: Mortgage and Refinance Rates in Your Area.]
Indicator of the Week: Home Sales Rebound
Existing-home sales surged 14.5% in February, according to the National Association of Realtors. While that’s the largest monthly percentage gain since July 2020 and the first increase in 12 months, overall sales are still down 22.6% compared with the same time last year.
“Pent-up housing demand continues to be sensitive to mortgage rate changes as potential buyers take advantage of any improvement in affordability,” says Hannah Jones, data analyst at Realtor.com.
Mortgage rates were nearly a whole point lower in February when compared with the peak of 7.33% in November, which gave buyers incentive to emerge back into the market with more affordable housing payments. But average mortgage rates have been about a half-point higher in March when compared with last month, meaning that home sales could pull back again.
The median sales price of existing homes sold last month also increased slightly from January to $363,000, about the same level it was a year earlier. Prices are much lower now than they were at their peak of $413,800 last summer. All told, home prices first rose and then fell by about $50,000 during the past 12 months.
But even though the median sales price is about the same as a year ago, the monthly payment on that same home would be much higher due to mortgage rates. The average 30-year fixed mortgage rate was around 4% last February, while it was closer to 6.7% this February. A homebuyer could expect to pay about $1,400 in monthly principal and interest payments for a median-priced home back then, compared with nearly $1,900 today.
Housing affordability struggles will continue to keep many buyers boxed out of the market this spring. There will be fewer homebuyers to compete with, which gives those who do decide to buy a home more leverage to negotiate. When compared with the past few spring homebuying seasons, the market will be a bit more balanced. Spring buyers may not have to waive contingencies, pay over list price or participate in bidding wars.
“As high prices and elevated mortgage rates continue to stifle buyer activity, this spring’s market is expected to be toned down relative to the last couple of years,” Jones says. “However, the housing market remains undersupplied, so well-priced, well-maintained listings are likely to draw buyer attention.”
With fewer sellers willing to list their homes on the market — and risk losing their record-low mortgage rate — there will still be a reduced selection of homes for sale for buyers. This spring won’t necessarily be a buyer’s market, but it will at least give buyers the chance to enter the market, especially if mortgage rates dip further in the coming months.
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Mortgage Rates Decline Again Ahead of Spring Homebuying Season originally appeared on usnews.com