According to a report released Thursday, mortgage rates fell for the second week in a row, as the US economy is facing numerous downturns and the real estate market shows signs of slowing for the very first time in years.
Rates on 30-year fixed-rate mortgages have fallen by 20 basis points since reaching a 2022 peak of 5.30 percent during the week ending May 12, averaging 5.10 percent during the week ending May 26, according to Freddie Mac’s weekly survey of lenders.
In Freddie Mac’s survey, this is the most dramatic two-week drop in rates since April 2020, when the outbreak of the pandemic turned the economy upside down.
The survey by Freddie Mac is based on conventional, complying, fully amortizing home buying loans for borrowers with 20% down and excellent credit. Borrowers with less-than-perfect credit or who make smaller down payments typically face higher interest rates.
Investors seeking safety after the stock market sell-off on Tuesday purchased bonds and mortgage-backed bonds, pushing yields lower this week. However, Freddie Mac’s survey primarily includes rates available Monday through Wednesday.
Rates were rising once more. According to Reuters, investors were digesting news that the economy contracted in the first quarter, as well as minutes from the Federal Reserve’s most recent meeting, which suggested that the Fed is committed to gradually tightening monetary policy. After falling as low as 2.71 percent on Wednesday, 10-year Treasury yields — a good predictor of future mortgage rates — were ascending toward 2.78 percent in afternoon trading Thursday.
“Despite recent rate cuts, the housing market has clearly slowed, and the slowdown is spreading to other areas of the economy, including consumer spending on durable goods,” said Freddie Mac Chief Economist Sam Khater in a statement.
Mortgage rates fell just as the hot housing market began to cool, with new home sales falling to a two-year low last week, falling 16.6 percent month over month and marking the fourth consecutive month of declines. Meanwhile, existing home sales have fallen for three consecutive months, during which mortgage rates have risen by 2.4 percent.
According to experts, the decline should be good news for homebuyers and the housing market, as it may stop construction companies from pulling back and exacerbating the current housing shortage.
“Leveling off mortgage rates is a saviour for potential homebuyers also attempting to deal with rising prices and record-high listing prices, and welcome news for the housing market overall,” Realtor.com chief economist research analyst Joel Berner said in a statement. “While the current market slowdown is increasing the number of homes for sale, it may actually worsen the existing overall shortage of housing in the long run if the news causes builders to pull back… The current mood is dark and stormy, but a timeframe of steadier rates below recent highs will allow buyers, sellers, and builders to adjust to a new financial environment.”
Berner pointed out that a $300,000 monthly payment still is $372 extra expensive than it would’ve been a year ago, and with housing prices rising significantly over the last year, $300,000 today buys a lot less than what it did last year.
So far, lower mortgage rates do not have seemed to have prompted homebuyer interest, according to a weekly basis Mortgage Bankers Association survey, which found that demand for purchase loans was virtually unchanged last week compared to the previous week, and down 16% from a year ago.
