Average mortgage rates inched closer to 7%, breaking their month-long streak of declines, according to the latest data from Freddie Mac.
The 30-year, fixed-rate mortgage averaged 6.95% in the week ended July 2, up from 6.86% the previous week, and higher than the comparable week this time last year when it stood at 6.81%, the mortgage giant said Thursday. The 15-year, fixed-rate mortgage averaged 6.25%. That’s up from last week when it averaged 6.16% and slightly above a year earlier when it was 6.25%. The data is adjusted for the Independence Day holiday on Thursday.
As of Wednesday afternoon, the current 30-year, fixed-rate mortgage had eased slightly, settling at 7.13%. The current 15-year, fixed-rate mortgage was also down slightly at 6.47%, according to Mortgage News Daily. Wednesday’s rate trend indicated the possibility of lower rates by the end of the day.
The direction change in mortgage rate averages comes at a particularly quiet time for the housing market and the economy. Recent data indicates a lull in housing market activity, including fewer sales of newly built and existing single-family houses and a weakening apartment rental market. Applications for mortgages are also on the decline after stalling for a few weeks, according to data from the Mortgage Bankers Association. It’s a sign that homebuyers are taking a step back from the market.
Economists, however, are hopeful that the second half of the year will bring lower mortgage rates and higher inventory, providing an incentive to buyers.
“Both new home and pending home sales are down, causing active listings to rise,” Freddie Mac’s chief economist, Sam Khater, said in a statement. “We are still expecting rates to moderately decrease in the second half of the year and given additional inventory, price growth should temper, boding well for interested homebuyers.”
Shifting Market
Over the past year, persistently high rates have caused a change in the overall makeup of the mortgage market.
Following the COVID-19 pandemic-era interest rate cuts, the market skewed toward lower-rate mortgages. That’s no longer the case, according to data released July 2 by mortgage data provider Intercontinental Exchange.
As of May, 24% of homeowners with a mortgage hold an interest rate of 5% or higher. That’s a significantly higher proportion than in 2022, when some 90% of that population had an interest rate below the 5% threshold.
“All in, there are 5.8 million fewer sub-5% mortgages in the market today than there were at this time in 2022,” Andy Walden, the firm’s vice president of research and analytics, said in a statement. “This has been a slow-moving change, as borrowers with lower rates have sold their homes or, to a smaller degree, refinanced to withdraw equity.”
The increase to a concentration of loans just below 7% is more a product of borrower mentality than their financial situations, according to Walden.
“There’s clearly something appealing in today’s market for a homeowner to see" a mortgage rate in the 6s, he said.