Mortgage rates fall to lowest level in more than three years
By Samantha Delouya, CNN
(CNN) — The average 30-year fixed mortgage rate was 6.06% for the week ending January 15, according to Freddie Mac. The last time home borrowing rates were this low was September 2022.
Experts hope the drop could help ease the stalemate in the housing market.
“The impacts are noticeable, as weekly purchase applications and refinance activity have jumped, underscoring the benefits for both buyers and current owners,” said Sam Khater, Freddie Mac’s chief economist. “It’s clear that housing activity is improving and poised for a solid spring sales season.”
This time last year, the average 30-year fixed rate was 7.04%. A buyer who purchased a $450,000 home with a 20% down payment at that rate would have faced monthly principal and interest payments of about $2,405. At today’s average rate of 6.06%, those payments would fall to roughly $2,172 – a savings of about $230 per month, or close to $84,000 over the life of a 30-year loan.
Earlier this month, President Donald Trump called for the purchase of $200 billion in mortgage bonds to try to push borrowing costs lower.
“This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable,” Trump wrote in a social media post last week.
Those purchases may already be putting modest downward pressure on mortgage rates, at least in the short term, said Susan Wachter, professor of real estate at the Wharton School of the University of Pennsylvania.
“It has started; we can already see it in the data,” she said of the purchases, though she added she hasn’t seen purchases amounting to $200 billion yet.
“Lock-in effect” beginning to thaw?
There are signs that the so-called “lock-in effect,” a defining feature of the housing market for the past few years, has started to ease, as well. For years, homeowners have been reluctant to sell, unwilling to give up the ultra-low mortgage rates they secured early in the pandemic.
That dynamic is starting to shift. The share of homeowners with mortgage rates above 6% has now surpassed the share with ultra-low rates below 3%, according to a Realtor.com analysis of outstanding mortgage data — suggesting fewer owners have a strong incentive to stay put.
Housing activity is starting to pick up after years of stalling. Sales of previously owned homes jumped 5.1% in December compared to the prior month, according to new data from the National Association of Realtors on Wednesday. That marks the fourth-straight month of gains, the longest streak since mid-2020.
More movement in the market hasn’t translated into lower prices, though. The median existing home sales price was $405,400 in December, according to NAR, marking the 30th-consecutive month of year-over-year price increases.
A more active housing market may not solve the affordability crisis on its own, but it carries broader economic benefits, said Daryl Fairweather, chief economist at Redfin.
“People who have felt locked in their homes may be turning down job opportunities, they may be delaying getting married, they may be delaying having a baby, all because they feel trapped in a home that doesn’t meet their needs,” she said. “If more people were shuffling around, it would help the economy and people’s quality of life – even if it doesn’t help solve housing affordability.”
The-CNN-Wire
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