Mortgage rates fell this week for the third-consecutive week, attracting more buyers into the market, Freddie Mac said Thursday.
According to the Freddie Mac Primary Mortgage Market Survey (PMMS), the 30-year fixed-rate mortgage (FRM) averaged 6.13%.
“Mortgage rates continue to tick down and, as a result, home purchase demand is thawing from the months-long freeze that gripped the housing market,” said Sam Khater, Freddie Mac’s chief economist. “Potential homebuyers remain sensitive to changes in mortgage rates, but ample demand remains, fueled by first-time homebuyers.”
Mortgage Rates:
- The 30-year fixed-rate mortgage averaged 6.13% as of Jan. 26, down from 6.15% last week. A year ago at this time, the 30-year FRM averaged 3.55%.
- The 15-year fixed-rate mortgage averaged 5.17%, down from 5.28% last week. A year ago at this time, the 15-year FRM averaged 2.8%.
Freddie Mac said the PMMS is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit.
Jiayi Xu, economist for Realtor.com said interest rates are among many economic indicators providing mixed messages.
“The Freddie Mac fixed rate for a 30-year loan rebounded slightly this week, following the trajectory of the 10-year Treasury,” Xu said. “While businesses and investors are watching the market closely, the recent large-scale layoffs in the tech sector combined with Monday’s stock market rebound have created mixed signals.
“On one hand,” she said, “many cash-burning tech companies are struggling with the Fed’s rate hikes. On the other hand, investors are happy about slowing inflation and anticipate that interest rate hikes may begin to moderate or stabilize in the months ahead.”
Xu said the nearly half-century low unemployment rate (at 3.5%) and the cooling inflation rate (6.5%) do not point toward a recession, but that “it’s important to keep in mind that monetary policy takes time to have an impact, and these economic indicators might not yet show the full effects of the restrictive policy.”
Fed Meets Next Week
The Federal Reserve’s Federal Open Market Committee (FOMC) is scheduled to hold its first two-day meeting of 2023 next week, on Jan. 31-Feb. 1, and is expected to announce a smaller increase in the federal funds rate (at 25 basis points) compared to the 50- and 75-basis-point increases in the previous meetings, she said.
“The slower rate increase is encouraged by the recent moderation in wage growth, which may still need to decrease further to reach the desired inflation rate of 2%,” Xu said. “While the Fed may continue to raise rates this year — reaching just above 5% from the current range of 4.25% to 4.5% — the slower pace will help to create a soft landing for the economy by balancing the risks of bringing down inflation without pushing up the unemployment rate.”
Despite slowing inflation, Xu said, the Fed is expected to maintain its restrictive monetary policy, which would keep mortgage rates in the 6%-7% range in the short term.
With concerns about high home prices and high mortgage rates, affordability remains at the center of the latest hottest housing market report, she said.
“In addition to high costs, concerns about economic uncertainty also had many buyers pausing their purchasing decisions and led to fewer transactions,” Xu said. “However, decreased competition may have presented opportunities for some first-time homebuyers, whose share of purchases increased slightly to 31% in December compared to 28% in November. Realtor.com’s Best Markets for First-Time Homebuyers in 2023 identified pockets of affordability in all four regions of the country, particularly in the northeast, where renters looking to become homeowners in 2023 might be able to find a deal.“
