The average long-term U.S. mortgage rate has decreased slightly, offering relief to potential homebuyers amidst rising home prices and a shortage of properties on the market. The average rate on a 30-year mortgage dropped to 6.79%, down from 6.87% the previous week. Additionally, the average rate on 15-year fixed-rate mortgages also saw a decrease to 6.11% from 6.21% last week. While rates remain elevated near 7%, these reductions provide some flexibility for buyers with stricter budgets. However, economists anticipate that rates will only moderately ease this year once the Federal Reserve begins cutting its benchmark interest rate.
After peaking at 7.79% in October, the average 30-year mortgage rate has stayed below 7% since early December, reaching as high as 6.94% just a month ago. The Federal Reserve has not yet lowered its short-term interest rate but has signaled the possibility of three rate cuts this year pending signs of slowing inflation. Market conditions, global demand for U.S. Treasurys, and the Federal Reserve’s actions all play a role in influencing home loan rates. Overall, economists predict that rates will gradually ease to around 6% by the end of the year.
The recent rise in mortgage rates has led to increased monthly payments for potential homebuyers, with the national median payment on home loan applications in February averaging $2,184. This is a 6% increase from the previous year. Despite this, the Mortgage Bankers Association forecasts a gradual easing of mortgage rates by year-end. The U.S. housing market is recovering from a two-year sales slump caused by a spike in mortgage rates and a shortage of homes on the market. The decline in mortgage rates since the fall has provided some financial relief for buyers.
Although sales of previously owned U.S. homes rose in February, the average rate on a 30-year mortgage still remains significantly higher than two years ago at 4.67%. This disparity has deterred homeowners with lower rates from selling their homes, contributing to the limited inventory. As rates hover around 7%, many potential homebuyers are adopting a “wait-and-see” approach until affordability improves and more listings become available. The market conditions are expected to shift as mortgage rates gradually ease and provide more opportunities for buyers in the future. It will be crucial for buyers to monitor changes in rates and market trends to make informed decisions when purchasing a home.
