Mortgage Rates Decrease Slightly, Providing Minor Relief in Unaffordable Housing Market

On Thursday, Freddie Mac announced a slight reduction in the average rate for the benchmark 30-year home loan, marking the end of a seven-week upward trend. The rate decreased from 7.79% to 7.76%, offering a small reprieve in an ever-increasingly unaffordable housing market. This time last year, the rate stood at 6.95%, as noted by Freddie Mac’s chief economist, Sam Khater.

Although this minor decline is welcome, the current mortgage rate for a 30-year loan remains over double what it was two years ago. This sharp rise in rates has resulted in higher costs for borrowers and has discouraged homeowners from selling their properties. Meanwhile, rates for 15-year fixed-rate mortgages, popular among those refinancing, remained unchanged at 7.03%.

The increase in mortgage rates, along with soaring home prices, has triggered a four-month downturn in the sales of previously occupied homes across the country. The combination of high interest rates and inflated prices has led to potential sellers hesitating, which in turn has increased the monthly expenses for borrowers.

Mortgage rates have been closely aligned with the trajectory of the yield on 10-year Treasury notes, which lenders reference when pricing loans. Following the Federal Reserve’s recent decision to maintain its main interest rate, the yield dropped from over 5% to 4.63%. This move by the Federal Reserve played a role in this week’s slight decrease in mortgage rates.

Despite this recent dip, prospective buyers are still facing a challenging housing market. The persistent issues of elevated interest rates and high home prices continue to exert pressure on both buyers and sellers in the real estate landscape.