Mortgage Rates Drop, but Price and Supply Problems Remain
Mortgage rates inched down again this week. According to Freddie Mac, the average rate on a 30-year, fixed-rate loan was just 2.78% — down 10 basis points from the week prior.
The dip stems from rising economic uncertainty, particularly as COVID-19 cases rise across the country.
“Concerns about the Delta variant, and the overall trajectory of the pandemic, are undoubtedly affecting economic growth,” said Sam Khater, Freddie Mac’s Chief Economist. “While the economy continues to mend, Treasury yields have decreased, and mortgage rates have followed suit.”
Though lower rates are certainly good news for borrowers, it seems few buyers are taking advantage of them. According to the Mortgage Bankers Association, applications to purchase a home were down 17% for the week (6% seasonally adjusted). It was the lowest point for purchase applications in over a year.
“Limited inventory and higher prices are keeping some prospective homebuyers out of the market,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
Refinance applications were down 3% for the week but remain near historic highs, according to Kan.
More in mortgage & housing news
- The National Association of REALTORS® released its existing home sales data this week, which showed a 1.4% increase in sales for June. The median home price was $363,300 — up 23.4% over the year.
- The Federal Housing Finance Agency announced it is eliminating the adverse market fee on Freddie Mac and Fannie Mae-backed refinances. The move should make refinance rates more affordable for conventional borrowers.
- The share of mortgage loans in forbearance fell to 3.5% this week. About 1.75 million homeowners are still on a forbearance plan, according to MBA.
- According to the Census Bureau, housing starts increased 6.3% from May to June and are now 29% higher than June 2020. Housing completions and building permits were both down for the month.
- Applications to purchase new construction have dropped 23.8% over the year, according to MBA. High material costs and labor shortages are largely to blame.
This week in mortgage rates
Mortgage rates fell on 15- and 30-year fixed-rate loans but rose slightly on ARMs.
Here’s how rates looked for each loan type:
- Conforming 30-year, fixed-rate loans: 2.78% (down from 2.88%)
- 15-year, fixed-rate loans: 2.12% (down from 2.22%)
- 5/1 adjustable-rate loans: 2.49% (up from 2.47%)
Make sure to check back here next week for the latest mortgage news.
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