Rates below 6.5% are lifting home purchase demand at the start of the spring homebuying season.
Mortgage rates continued to slide this week, even after recent bank failures failed to stop the Federal Reserve from hiking its benchmark interest rate for the ninth consecutive time. Mortgage rates are following the downward trend of 10-year Treasury yields, which is helping to lift homebuying demand. While the 30-year fixed-rate mortgage averaged 6.42% this week, according to Freddie Mac, mortgage applications to purchase a home rose 2% week over week, the Mortgage Bankers Association reported.
Buyers appear ready to act upon movement in mortgage rates. In February, existing-home sales posted their first monthly gain in a year—up 14.5% from January, the National Association of REALTORS® reported this week. “Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” says NAR Chief Economist Lawrence Yun. Home prices also are stabilizing, as Yun has previously predicted, actually falling last month for the first time in more than a decade.
All of this news bodes well for a potentially robust spring real estate season. “If mortgage rates continue to slide over the next few weeks, look for a continued rebound during the first weeks of the spring homebuying season,” says Sam Khater, Freddie Mac’s chief economist.
The Fed has taken an aggressive stance toward raising its benchmark rate over the past year to fight high inflation. The Fed continued to press forward with that stance this week despite financial turmoil sparked by the closures of Silicon Valley Bank, Signature Bank and Silvergate Capital. Mortgage rates are not directly tied to the Fed’s benchmark rate but can be influenced by it.
Mortgage rates are experiencing daily fluctuations due to economic volatility and uncertainty about the stability of the banking system, says Holden Lewis, home and mortgage expert at NerdWallet. “After a couple of weeks of volatility, mortgage rates are likely to stabilize as a result of this Federal Reserve hike,” Lewis says. Still, “home buyers should accept that if they wait for interest rates to fall substantially, they might wait longer than they expect.”
Home buyers may benefit from shopping around for the best mortgage rate, given the volatility. Freddie Mac’s research shows that home buyers could potentially save $600 to $1,200 annually by taking the extra time to shop and collect quotes from multiple lenders.
Freddie Mac reported the following national averages with mortgage rates for the week ending March 23:
- 30-year fixed-rate mortgages: averaged 6.42%, down from last week’s 6.6% average. Last year at this time, 30-year rates averaged 4.42%.
- 15-year fixed-rate mortgages: averaged 5.68%, also down from last week’s 5.9% average. A year ago, 15-year rates averaged 3.63%.