Mortgage rates have fallen for the fourth week in a row, following a smaller interest rate hike by the Federal Reserve. The 30-year fixed-rate mortgages for prime borrowers with a 20% down payment averaged 6.09% this week, down from 6.13% the previous week. This downward trend in rates started in November 2022, alongside data showing that inflation may have peaked. Currently, rates are nearly a full point lower than last year’s peak of 7.08% reached in November 2022.
Freddie Mac’s Chief Economist has stated that a 1% reduction in rates can allow an additional 3 million mortgage-ready consumers to qualify for a median home price of $400,000. The Fed’s decision to slow the pace of interest rate hikes signals progress in controlling inflation, and as inflation pressures ease, wholesale mortgage banks have also lowered the cost of borrowing. The Fed’s actions are keeping a floor under mortgage rates for the short-term, and rates are expected to stay around 6% for the next few weeks.
The Mortgage Bankers Association is forecasting a modest drop in mortgage rates through 2023, ending closer to 5%. This could lead to more bidding wars later in the year. Other economic data, such as jobs and inflation reports, also play a role in determining mortgage rates.
The drop in mortgage rates has eased the financial burden on homebuyers, making it easier for them to qualify for a home loan. This is great news for those looking to purchase a home in the near future. The Fed’s actions and the current economic data indicate that mortgage rates will remain stable, giving homebuyers a more favorable lending environment.