Buyers in the market saw borrowing costs fall slightly this week. (iStock)
Mortgage rates rose above 7% again this week, but Freddie Mac said April’s inflation numbers were a promising step toward relief.
The average interest rate on a 30-year fixed-rate mortgage for the week ending May 16 was 7.02%, according to Freddie Mac’s latest research. Primary mortgage market research. That was down from the previous week’s average of 7.09%, but still up from 6.39% a year ago.
The average interest rate on a 15-year mortgage was 6.28%, down from 6.38% last week and up from 5.75% last year.
April inflation data released on Wednesday showed a slowdown in consumer prices. On an annualized basis, prices rose 3.4% in April, slowing slightly from the previous month’s 3.5% rise and in line with expectations.
On a monthly basis, prices rose 0.3%, following a 0.4% rise in the previous month, below the 0.4% growth expected by economists. This development allays concerns about a resurgence in inflation and how the Federal Reserve will respond. It also reaffirmed the central bank’s view that interest rate cuts could be implemented this year, helping to stabilize mortgage costs.
“Mortgage rates have fallen for the second week in a row,” said Sam Cater, chief economist at Freddie Mac. “The 10-year U.S. Treasury yield fell on news that inflation had eased slightly, leading to lower mortgage rates. Lower interest rates, even if small, are a major factor in people considering buying a home. It could give people a little more leeway in their budgets.”
If you’re ready to choose the best interest rate on your new mortgage, consider visiting online marketplaces like Credible to compare rates and get pre-approved from multiple lenders at once.
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The amount of down payment is important
Realtor.com said in a statement that the average mortgage rate for new originations in the first quarter of 2024 was approximately 3 percentage points higher than the average outstanding rate for the same period. These affordability constraints leave many buyers in a bind.
Buyers who remain in the market are making larger down payments to lower overall borrowing costs. They tend to be higher income earners or have existing home equity, making affordability hurdles even higher for first-time buyers.
According to realtor.com, in the first quarter of 2024, down payments averaged 13.6% and the median was $26,000. report. Although this value is below the peak of 14.7% in Q3 2023, down payments are still well above the typical 10% that buyers had saved before the COVID-19 pandemic.
“Soaring home prices and rising mortgage rates continue to pose major hurdles for first-time homebuyers who may lack leverage,” said Realtor.com economist Jiayi Xu. ” “Thankfully, there is a glimmer of relief as median asking rents have declined for eight consecutive months, providing a glimmer of hope that these prospective buyers will be able to save more money for their first home. There is.”
One way to leverage the equity in your home is to do a cash-out refinance to help pay down debt or finance home improvement projects. Visit Credible to find the interest rate that’s right for you without affecting your credit score.
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More affordable housing efforts underway
President Biden called on Congress to invest more than $175 billion in affordable housing efforts, according to a recent White House report. statement.
The administration will use some funds to build and maintain millions of units of affordable housing for rent and ownership, including accessory dwelling units and manufactured housing, and provide state and local governments with affordable housing. It proposes to encourage the reduction of barriers to housing development.
The Biden administration is also proposing a new Neighborhood Housing Tax Credit. The proposed federal effort would make housing more affordable for homebuyers by injecting $16 billion into adding housing inventory to the market and $10.1 billion into home purchases. Down payment assistance. The tax credit is provided to low- or moderate-income homeowners on the condition that they occupy the home.
Biden also called on Congress to enact legislation that would provide a $10,000 tax credit to first-time homebuyers and those who sell their initial home. This credit will be credited to him as monthly payments of $400, split over two years.
This tax credit is equivalent to lowering the median mortgage interest rate by 1.5 percentage points over two years. Over the next two years, it could help more than 3.5 million middle-class families buy their first home. Expanding lending to people buying second homes could also help improve the supply of housing for people in the entry-level housing market.
Even if you’re looking to become a homeowner, shopping around can help you find the best mortgage rates. Visit Credible to compare options without affecting your credit score.
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