The outlook for potential homebuyers looked a bit brighter Thursday, with a downturn in a key mortgage rate helping offset less rosy news the day before about inflation.
The average weekly rate for a 30-year fixed-rate mortgage fell to 6.87%, the fourth consecutive week of declines, according to mortgage company Freddie Mac. This week’s figure was down from 6.89% and from just over 7% in mid-January.
“Recent mortgage rate stability is benefitting potential buyers, as purchase demand is stronger than this time last year. This is an indication that a thaw in buyer activity could be on the horizon,” Freddie Mac chief economist Sam Khater said in a statement.
It’s unclear if the monthly inflation report released on Wednesday will cause the rate to reverse course. The U.S. Bureau of Labor Statistics said inflation rose 0.5% in January, and 0.4% for shelter. Those numbers were the reason the daily mortgage rate shot up to 7.13% on Wednesday, Matthew Graham of Mortgage News Daily said in a blog post; the daily rate fell back to 7.04% on Thursday. Daily rates tend to be more volatile than the weekly report.
“In response to the inflation impact, investors effectively require higher interest payments before deciding to invest in fixed-income debt like the mortgage market,” Graham said on Wednesday. “The average lender moved up by nearly an eighth of a percent, which is actually not as bad as it could have been, all things considered.”
While the weekly average 15-year fixed-rate mortgage rate has tended to move up or down in tandem with the 30-year rate, that wasn’t the case this time. The 15-year rate was 6.09%, up from 6.05% one week earlier. Most Americans take out 30-year mortgages, according to Bankrate.com; while 15-year mortgages carry lower rates, they require homebuyers to fork over larger monthly payments.
Applications for mortgages to buy houses continued to trend downward this week, the Mortgage Bankers Association said, falling 2 percent on a seasonally adjusted basis. Overall, applications were up 2.3% due to an increase in people refinancing their homes. It was the strongest week for refinances since October, MBA vice president and deputy chief economist Joel Kan said in a statement.