I personally would say “Hell No” to this rate. Up or down a fraction of a percentage please before I locked this one in!
The rate on a 30-year fixed mortgage averaged 6.66% this week, down from 6.70% one week ago, mortgage finance giant Freddie Mac reported on Thursday. Last year at this time, the typical rate was 2.99%.
The interest rate on the most popular home loan in America has fallen for the first time in seven weeks, ending a streak that pushed borrowing costs to their highest point since 2007.
Yet even with the decline, the average 30-year fixed mortgage rate is still more than double what it was last year.
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Unfortunately for borrowers, this week’s dip was just a small step back after a headlong sprint forward.
Despite a slight decrease this week in mortgage rates, the average for the 30-year fixed-rate loan remains more than double what it was a year ago, adding hundreds of dollars per month to financing costs for home buyers. This is prompting more buyers to retreat from the market: Mortgage applications to purchase a home are down 13% week over week and have fallen 37% compared to a year ago, the Mortgage Bankers Association reported this week. “Rates remain quite high compared to just one year ago, meaning housing continues to be more expensive to potential home buyers,” says Sam Khater, Freddie Mac’s chief economist.
Realtor.com® reports that home buyers have lost about $107,000 in buying power this year. That means buyers who budgeted for a $500,000 home at the start of the year may now be able to afford a property worth only $400,000 or less.
The monthly payment for a borrower financing a $400,000 home purchase with 20% down is now over $200 more than where it was last month.
Will Higher Rates Spark More Urban Flight?
Home buyers may be tempted to expand their search criteria to find places that offer greater affordability farther away from city centers. Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®, notes that rural areas, which are seeing migration gains, continue to be a prime target for buyers. “With mortgage rates near 7%, many people are looking for more affordable homes in less dense areas,” Evangelou writes on the Economists’ Outlook blog. In general, she notes, homes are about 50% less expensive in rural areas and about 20% less expensive in the suburbs than in urban centers.
Freddie Mac reports the following national averages for mortgage rates for the week ending Oct. 6:
- 30-year fixed-rate mortgages: averaged 6.66%, with an average 0.8 point, falling slightly from last week’s 6.70%. Last year at this time, 30-year rates averaged 2.99%.
- 15-year fixed-rate mortgages: averaged 5.90%, with an average 1 point, dropping from last week’s 5.96% average. A year ago, 15-year rates averaged 2.23%.
- 5-year hybrid adjustable-rate mortgages: averaged 5.36%, with an average 0.3 point, increasing from last week’s 5.30% average. A year ago, 5-year ARMs averaged 2.52%.
Freddie Mac reports commitment rates along with average points to better reflect the total upfront cost of obtaining the mortgage.