While some homebuyers are still deterred by elevated borrowing costs, recent downward pressure on the mortgage industry has analysts hopeful for a spring thaw in the housing market.
As of Thursday, the average 30-year, fixed-rate mortgage was 6.95%, according to mortgage giant Freddie Mac. That’s little change from the previous week’s average of 6.96%, and it’s higher than the average reported at the comparable time a year ago.
On a daily basis, there was a similar incremental decline as the 30-year, fixed-rate mortgage dropped to 7.06%, data from Mortgage News Daily showed.
The 15-year, fixed-rate mortgage had also eased slightly as of Thursday, averaging 6.12%, according to Freddie Mac. The daily rate had also fallen and settled at 6.48%, Mortgage News Daily’s measure showed.
This week’s data marks the second straight week of declines in mortgage rate averages, a welcome change after six weeks of increases that ended this month.
"The 30-year fixed-rate has hovered between 6% and 7% for most of the last two and a half years. That trend continued this week,” said Sam Khater, Freddie Mac’s chief economist, in a statement. "Driven by these higher rates and a persistent supply shortage, affordability hurdles still exist for many homebuyers and a significant number of them remain on the sidelines.”
Even so, homebuyers have started to pull away from the market, deterred by the cost to take out a mortgage, according to data from the Mortgage Bankers Association. MBA data show that applications for mortgages fell for the first time in three weeks.
The housing market likely will get a boost when spring arrives, according to analysts and Mortgage Bankers Association President and CEO Bob Broeksmit.
“MBA anticipates that demand will pick up as the spring homebuying season gets underway, and the uptick in housing supply should help to alleviate home-price growth pressures,” Broeksmit said in a statement.
Higher for longer
Thursday’s data also comes on the heels of the Federal Reserve’s Wednesday decision to hold interest rates steady in the range of 4.25% and 4.5%. But it’s important to note that mortgage rates don’t change in accordance with the Fed’s policy. Instead they follow the trend of 10-year Treasury rate the government pays to borrow money from investors.
That said, investors in the Treasury market can react to the Fed, and some economists said yesterday’s decision by the central bank could keep long-term rates relatively unchanged for now.
“With the Fed on hold, we do expect that longer-term rates, including mortgage rates, will also stay within a narrow range for the foreseeable future,” said Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association in a statement Wednesday.
In other words, mortgage rates likely won’t drop drastically anytime soon.
As for what could prompt big changes in the mortgage market, Melissa Cohn, regional vice president at William Raveis Mortgage, said upcoming economic data offer the best signal right now.
“Mortgage rates will move with inflation and employment data, as always, even with all the uncertainty behind President Trump’s implementation of his new policies and the impact on inflation and the economy,” she said in a statement. “There are a lot of unknowns at the moment.”