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We have all been keeping up with the news about inflation and its effect on mortgage interest rates over the last year. Recent news reports have given buyers hope as rates have declined some from their highs in September 2022, resulting in increases in mortgage and refinance applications.
Rates fell this week for the third straight week, mortgage applications increased 7% and refinance applications increased 15% over the previous week.
Drops in mortgage rates help increase buyers’ purchasing power so buyers who put their home buying plans on hold when interest rates started to rise are starting to wade back into to market. “With a 6% rate instead of 7%, buyers pay about $2,700 less every year on their mortgage. As a result, owning a home becomes more affordable to about 1.4 million more renters and 4.3 million more homeowners.**”
A look at this chart shows that in historic terms, mortgage rates are not extremely high, however, compared to what most people are familiar with (the last 10-12 years) rates are much higher than most of us are used to.
"Let's celebrate some good news.... mortgage rates are down. With inflation showing a tangible slowdown, I do expect mortgage rates to follow suit in the months ahead."
The current rate drops open up an opportunity for buyers, but bottom line, analysts explain why you shouldn’t expect to fall back down to levels seen in 2021.
“I think we could be surprised at how much mortgage rates pull back this year. But we’re not going back to 3 percent anytime soon, because inflation is not going back to 2 percent anytime soon.”
What should you do? Check in with your mortgage lender to see what current rates are and what you may pre-qualify for. Then check in with your Realtor to learn more about current home inventory and what you can buy based on your pre-approval. Need help with contacting a mortgage lender, Realtor, or both? Fill out our form, and we can help!
Sources:
* CNBC – Weekly mortgage demand jumps 7% as interest rates drop to lowest level since September