Mortgage Rates Drop Closer to 7% as Affordability Concerns Persist
The average 30-year fixed mortgage rate has dropped closer to 7% this week, providing some relief for potential homebuyers. According to Freddie Mac, the rate declined to 7.02% from 7.09% a week prior, marking the second consecutive week of decreases after multiple increases in April and early May.
Additionally, a separate measure tracking daily rate movement also showed rates falling over the last seven days, settling at 6.99% on Thursday, according to Mortgage News Daily. While this downward trend has made homeownership more affordable for some, financing costs are still too high for many prospective buyers.
Despite the decrease in mortgage rates, the overall housing market remains sluggish, with little indication of a summer turnaround. Jessica Lautz, the National Association of Realtors’ deputy chief economist, expressed concerns about the current situation, stating, “We want lower mortgage interest rates; we want consumers to be able to afford to purchase a home, especially as a new first-time homebuyer. I am not sure that there is an overnight solution.”
The weekly volume of home-purchase applications decreased by 2% this week, according to the Mortgage Bankers Association (MBA), and was 14% lower than the same week a year ago. Joel Kan, MBA’s deputy chief economist, noted that while lower rates benefit prospective homebuyers, mortgage rates are still significantly higher than they were a year ago.
Mortgage rates have increased by more than half a point since last May, impacting affordability over the past 12 months. Monthly mortgage payments have risen by over 5% compared to a year ago, with the national median payment surpassing $2,200 in March.
Despite a slight slowdown in price acceleration in April according to the latest Consumer Price Index (CPI), Fed officials are hesitant to lower benchmark rates until they see sustained progress. Jerome Powell, the Fed’s chairman, indicated that at least three months of easing inflation would be necessary before considering a rate cut, which may not occur until fall.
Overall, the housing market continues to face challenges due to elevated mortgage rates, impacting affordability for potential buyers. Stay tuned for further updates on the evolving financial landscape.
