The 30-year fixed-rate mortgage averaged 5.09% in the week ended June 2, It’s down from 5.10% in the previous week, according to Freddie Mac. It’s still well above the 2.99% average this time last year.
“Mortgage rates have continued to fall this week but are still significantly higher than last year, affecting affordability and buying demand,” said Sam Khater, chief economist at Freddy Mac. “With summer approaching, the pool of potential homebuyers has shrunk, supply is rising and the housing market is returning to normal. This is welcome news after the unprecedented market tightness over the past two years.”
At the end of May 2021, the buyer took a 20% discount on a $375,500 home — just below the median price for an existing home — and financed the rest with a 30-year mortgage at an average flat rate. The interest rate was 2.99%, and the monthly mortgage payment of principal and interest was $1,265, according to figures from Freddie Mac.
Today, a homeowner who buys a home at the same price at an average rate of 5.09% will pay $1,629 per month in principal and interest. That’s an extra $364 each month and an extra $131,147 in cumulative interest payments over the life of the loan, according to numbers from Freddie Mac.
But, Jones said, there may be good news ahead as more homes enter the market.
“While inventory is still low by historical standards, it is beginning to tilt in a more buyer-friendly direction,” she said. “This is likely to lead to slower price growth in the not too distant future as sellers compete for buyers, ultimately creating a more balanced market.”
Do mortgage rates continue to rise?
However, many buyers cannot afford to buy a home that suits their needs with high mortgage rates.
“Those who are currently home shopping will tell you that we are not there yet, as interest rates remain high and house prices create challenges in finding their perfect home,” Jones said.
Mortgage rates tend to track 10-year US Treasuries. However, rates remained mostly flat last week even as 10-year Treasury yields increased.
But rates are also indirectly affected by the Fed’s actions.
The Fed has been trying to tame inflation by raising interest rates over the past two months. The central bank indicated that there are more price increases in the future.
Earlier this week, President Joe Biden met with Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen and expressed support for the Fed’s actions to curb inflation and pledged to refrain from influencing interest rate decisions.
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