Mortgage rates down as applications rise: Freddie Mac

Mortgage rates responded to positive economic data by falling for the second week in a row, according to Freddie Mac.

The average 30-year fixed-rate mortgage was 6.95% for the week ending June 13, according to the latest Freddie Mac Primary Mortgage Market Survey. That’s down from a week ago when it averaged 6.99%, but down from 6.69% a year ago.

The average rate for a 15-year mortgage was 6.17%, up from 6.29% last week and from 6.10% last year.

The rate cut followed a positive inflation report, indicating a slight softening of consumer prices. On an annual basis, prices rose 3.3% in May, down from a 3.4% increase last month and below market expectations. On a monthly basis, prices remained unchanged after rising 0.3% a month earlier. Economists polled by Dow Jones had been looking for a monthly gain of 0.1% and an annual rate of 3.4%.

Inflation continues to ease toward the 2% target set by the Federal Reserve. Despite the progress, the central bank intends to keep interest rates higher until it has more confidence that inflation is moving in the right direction. On Wednesday, it announced it would keep the federal funds rate range at 5.25% to 5.5%, where rates have been held steady since last July.

“Mortgage rates continued to fall back this week as incoming data suggests the economy is cooling to a more sustainable level of growth,” said Freddie Mac Chief Economist Sam Khater. “Headline inflation numbers were flat, but housing inflation, which measures the costs of renting and owning a home, rose showing that housing affordability continues to be a persistent obstacle for homebuyers.”

If you’re considering becoming a homeowner, it can help to shop around to find the best mortgage rate. Visit Credible to compare options from different lenders and choose the one with the best rate for you.

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Mortgage applications on the rise

The slight decrease in mortgage rates has spurred more activity in the market. According to data released by the Mortgage Bankers Association (MBA), mortgage applications rebounded by 15.6% for the week ended June 7, on a seasonally adjusted basis. Excluding adjustments, the index rose 26% from a week ago.

Mortgage refinances rose 28% from a week ago and were 28% higher than a year ago. Lower mortgage rates spurred “strong growth” in refinancing activity, particularly for Veterans Affairs borrowers, “who jumped at the chance to lower their rates,” said Mike Fratantoni, SVP and Chief Economist of the Bankers Association of Mortgages (MBA).

Mortgage rates have largely risen in sync with interest rates, and an easing of interest rates is likely to lower borrowing costs. However, even without an interest rate cut, mortgage rates have started to fall and are expected to continue falling this year, with the MBA predicting they will fall as low as 6.5%.

“After two weeks of declines, mortgage applications rose more than 15 percent as borrowers traded in slightly lower mortgage rates,” said MBA President and CEO Bob Broeksmit. “A further decline in mortgage rates, along with reports of increased inventory levels in markets across the country, is good news for potential homebuyers this summer.”

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Homebuyers made thousands of dollars as mortgage interest rates fall: REDFIN

The Fed holds the key to unlocking more housing inventory

Falling borrowing costs are a windfall for homebuyers, but it likely won’t be enough to induce homeowners locked into historically low mortgage rates to move. A significant rate cut would require the Fed to raise interest rates.

Millennials and Gen Xers have locked in the lowest mortgage rates at roughly 4.0%, a recent Freddie Mac report said. Thirty-seven percent of millennials locked in their lowest rates in 2020 and 2021, buying their first home. Gen Xers, on the other hand, locked into lower rates in that time frame through refinancing.

“Despite the decline this week, mortgage rate trends are unlikely to break the lock-in effect of mortgage rate inventory until at least the end of the year and possibly into 2025, as the Fed holds firm in the fight against inflation, ” realtor .com Senior Economist, said Ralph McLaughlin. “We may need to see a 150-200 bps drop in the 10-year yield to get to a point where sellers feel comfortable selling and buying another home, and at current spreads, that could take a quarter point 3-4 rate cut by the Fed.

“Right now, the market is only estimating 1 cut by the end of the year and 2-3 cuts in 2025,” McLaughlin continued. “As such, anyone hoping that the lock-in effect will break down this year may be sorely disappointed.”

Home buyers can find the best mortgage rates by shopping around and comparing options. You can visit an online marketplace like Credible to compare rates and choose your loan term.

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