Real Estate Updates

Good News: Mortgage Rates Drop for the Second Week in a Row, Remain Above 6.5%

mortgage rates drop

Take a big breathe, Much-awaited thing is happening now, the potential for lower mortgage rates is a good possibility as inflation retards. 

Mortgage rates have experienced a decline for the second week running, signaling a positive trend for potential borrowers. However, despite this decrease, rates still linger above 6.5%, a substantial difference from the levels observed a year ago. As a result, borrowers are finding little reason to celebrate. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.69% this week.

This decrease in mortgage rates coincides with encouraging economic developments. The Federal Reserve recently decided to halt its benchmark interest rate hikes in June, a decision that could impact mortgage rates in various ways. Additionally, inflation has dropped to 4%, the lowest it has been in two years.

Freddie Mac’s chief economist, Sam Khater, suggests that as inflation continues to decelerate, economic growth slows, and the tightening cycle of monetary policy reaches its peak, mortgage rates are expected to decrease further later this year and into the next.

Economic indicators support this outlook, hinting at the possibility of even faster inflation easing in the coming months. One contributing factor is the cooling trend in rent growth, which is projected to persist in the upcoming months. Nadia Evangelou, senior economist and director of real estate research at the National Association of REALTORS®, asserts that as rent prices decelerate, inflation will further subside, thereby exerting downward pressure on mortgage rates.

To put this into perspective, Evangelou explains that individuals paying a monthly rent of $1,655 could redirect the same amount toward a monthly mortgage payment for a home valued at $321,000, assuming the current mortgage rate.

Freddie Mac’s report provides a snapshot of the national average mortgage rates for the second week of June:

  • 30-year fixed-rate mortgages: averaged 6.69%, representing a decline from the previous week’s average of 6.71%. Comparatively, a year ago, 30-year rates averaged 5.78%.
  • 15-year fixed-rate mortgages: averaged 6.10%, indicating a slight increase from the previous week’s average of 6.07%. In contrast, a year ago, 15-year rates averaged 4.81%.

Despite the consecutive weekly drops, mortgage rates remain elevated above the 6.5% mark. However, the combination of factors such as the Federal Reserve’s decision and decreasing inflation suggests a potential future decline in mortgage rates, offering prospective homeowners a glimmer of hope in their pursuit of affordable housing.

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