The third week in row sees mortgage rates drop

Washington, DC
CNN
 — 

According to data released by Freddie Mac on Thursday, homebuyers experienced another week of falling mortgage rates. The average rate fell last week for the third consecutive week.

In the week ending March 30, the average 30-year fixed rate mortgage was 6.32%, down from 6.42% the previous week. The 30-year fixed rate was 4.67% a year ago.

“Economic uncertainty continues to bring mortgage rates down,” said Sam Khater, Freddie Mac’s chief economist. “Over the last several weeks, declining rates have brought borrowers back to the market but, as the spring homebuying season gets underway, low inventory remains a key challenge for prospective buyers.”

The average mortgage rate is based upon mortgage applications that Freddie Mac receives form thousands of lenders in the United States. This survey only includes borrowers with excellent credit and who have put down 20%.

Rates started trending down in 2023, after reaching a 2022 record of 7.08% in November. After robust economic data showed that the Federal Reserve was continuing to fight for the US economy, rates rose in February.

Last week the Federal Reserve did raise interest rates — by a quarter point — in an effort to continue to fight stubbornly high inflation while taking into account recent risks to financial stability.

“As the dust settled after last week’s FOMC meeting, markets adjusted to the short- and long-term implications of higher interest rates and the possibility of stricter lending requirements, along with a possible end to rate hikes on the horizon,” said Hannah Jones, economic data analyst at Realtor.com.

While the Fed does not directly set mortgage interest rates, it has an influence on them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. Mortgage rates are affected by Treasury yields. If they rise, then mortgage rates will follow.

The banking turmoil may do some of the Fed’s work of cooling inflation for it.

“These factors create a less hospitable borrowing environment, which would serve to bring inflation closer to a healthy level,” Jones said. “More expensive, stricter lending helps to usher in the long-term health of the economy, but the downside is that borrowing for large purchases, including a home purchase, may be relatively more challenging in the short term.”

Jones said that potential buyers are still facing high mortgage rates and higher home prices which makes it less affordable to buy than one year ago.

Good news for home buyers: Home prices are not increasing as fast, or dropping in certain areas.

“Pent-up housing demand is evident with every gain in affordability, whether it be softening prices or lower mortgage rates,” said Jones. “As the prime spring buying season takes off, buyers will be looking for well-priced, ready-to-move-in homes.”

Buyers are still very sensitive to mortgage rates. They will continue to look for opportunities to lower their mortgage rates this spring.

“The mortgage market has seen a partial revival in March, with the recent decline in mortgage rates boosting borrower demand,” said Bob Broeksmit CEO of the Mortgage Bankers Association.

MBA says that while applications for home purchase and refinances remain well below their levels a year back, they have increased for the past four weeks.

“New and existing supply is still low, but lower mortgage rates and slower home-price growth have improved buyers’ purchasing power this spring,” he said.