According to Freddie Mac, the 30-year fixed-rate mortgage averaged 5.13% in the week ending Aug. 18. Despite the recent drop, rates are significantly higher than this time last year, with the 30-year at 2.86%.
“Inflation appears to have passed its peak, halting the rapid increase in mortgage rates that the housing market enjoyed earlier this year,” said Freddie Mac Chief Economist Sam Kader.
“The market continues to absorb the cumulative impact of large price and rate hikes, which has led to a fall in affordability,” Khader said. “As a result, purchase demand will continue to drag later in the year, supply will increase moderately and house price growth will slow.”
Mortgage application activity was lower last week than the previous week and overall applications fell to their lowest level since 2000, the Mortgage Bankers Association said.
“As high mortgage rates, challenging affordability and a bleak outlook for the economy put buyers on the sidelines, home purchase applications continued to stall as demand slowed,” said Joel Kahn, MBA’s associate vice president for economic and industry forecasting. .
However, if house price growth slows significantly and mortgage rates remain low, buying activity could pick up again later in the year.
However, affordability remains a challenge for many prospective homebuyers, especially compared to the cost of financing a home last year.
A year ago, a buyer who put 20% down on a $390,000 home and financed the rest with a 30-year, 2.86% average interest rate fixed-rate mortgage had a monthly mortgage payment of $1,292, according to Freddie’s calculations. Mac
Today, a homeowner buying the same priced home with an average rate of 5.13% would pay $1,700. a month in principal and interest. That’s almost $408 More every month.