Home >> Uncategorized >> Mortgage Rates Fall After Two-Week Jump
Print This Post Print This Post

Mortgage Rates Fall After Two-Week Jump

After two consecutive weeks on the rise, Freddie Mac reports that the 30-year, fixed-rate mortgage (FRM) fell slightly week-over-week, averaging 6.39%, down from last week when the FRM stood at 6.43%. A year ago at this time, the 30-year FRM averaged nearly a full percentage point lower at 5.27%.

Also this week, the 15-year fixed-rate mortgage averaged 5.76%, up from last week when it averaged 5.71%. A year ago at this time, the 15-year FRM averaged 4.52%.

“This week, mortgage rates inched down slightly amid recent volatility in the banking sector and commentary from the Federal Reserve on its policy outlook,” said Sam Khater, Freddie Mac’s Chief Economist. “Spring is typically the busiest season for the residential housing market and, despite rates hovering in the mid-6% range, this year is no different. Interested homebuyers are acclimating to the current rate environment, but the lack of inventory remains a primary obstacle to affordability.”

Instability in the economic sector began earlier this week when First Republic Bank was taken over by the Federal Deposit Insurance Corporation (FDIC) and most of its assets and deposits (insured and uninsured) auctioned off to JPMorgan Chase.

“Our government invited us and others to step up, and we did,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase of the transaction. “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund.”

Also this week, the Federal Reserve, for the 10th consecutive time, raised the nominal interest rate by 25 basis points to a range of 5.00% to 5.25% due to the easing—but not taming—of inflation which the Fed is “strongly committed” to returning inflation to its 2% objective. The move by the Fed extended the biggest string of consecutive rate hikes on record. Since the rate hikes began, the FOMC raised rates in March 2022 (+25 points), May 2022 (+50 points), June 2022 (+75 points), August 2022 (+75 points), September (+75 points), November 2022 (+75 points), December 2022 (+50 points), February 2023 (+50 points), March 2023 (+25 points), and now May 2023 (+25 points). This is equivalent to a rise of 5.00 percentage points over the last year.

“As the Fed’s decision was well anticipated, the rate hike is unlikely to cause significant changes in mortgage and other interest rates,” noted Realtor.com Economist Jiayi Xu. “The higher rates will continue to slow economic growth toward the target rate of 2%. However, as the impacts of earlier rate increases continue to work through the economy and the recent bank failures reveal the impact of higher rates, there is a risk of the U.S. economy entering a recession. Although markets are more focused on whether the rate hikes have concluded, the Federal Reserve did not provide a definitive forward guidance in the meeting and continues to leave the door open to various scenarios.”

Despite mortgage rates falling back slightly, the Mortgage Bankers Association (MBA) reports that overall mortgage application volume decreased 1.2% week-over-week.

“Even with a small decline in rates last week, mortgage applications decreased slightly, with refinance and purchase activity both remaining well below year-ago levels,” added MBA President and CEO Robert D. Broeksmit, CMB. “While MBA expects the ongoing uncertainty in the financial markets to keep mortgage rates volatile in the weeks ahead, we still anticipate they will fall, ending the year closer to 5.5%.”

And as rates linger above the 6% mark, the spring housing market has been anything but typical to date. A lack of inventory has limited choices for many, and many have been hamstrung by affordability concerns. A new report from Zillow finds that 52% of Gen Zers, and 57% of Millennials who don't currently own a home believe they'd need to win the lottery to afford one.

“The housing market is moving slower this spring. In a typical year, we would expect to see the number of homes for sale begin to increase more significantly from this point forward,” added Xu. “However, mortgage rates remain elevated, leading many sellers to report feeling ‘locked in’ by their current low mortgage rate and planning to wait until rates come down before selling, leading to fewer newly listed homes than a year ago.”

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

Check Also

Some Homeowners Feel Negatively About Building More Housing Near Them

A recent Redfin survey revealed nearly 80% of respondents support promoting building more housing, while 20% of them remain opposed to building an apartment complex in their neighborhood.