As mortgage rates remain high, homebuyers are looking for ways to lower costs. (iStock)
The Federal Reserve is unlikely to reverse its restrictive policy stance anytime soon, pushing mortgage rates further into the 7% range, according to Freddie Mac.
The average interest rate on a 30-year fixed-rate mortgage for the week ending May 2 was 7.22%, according to Freddie Mac’s latest research. Primary mortgage market research. This is up from the previous week’s average of 7.17%. A year ago, the average interest rate on a 30-year fixed-rate mortgage was 6.39%.
The average interest rate on a 15-year mortgage was 6.47%, up from 6.44% last week and up from 5.76% last year.
The Federal Reserve announced Wednesday that it would keep the federal funds rate at 5.25% to 5.5%, where it has been since last July. Fed officials have said in past meetings that they expect to cut rates in 2024 but need more confidence that inflation is on track to reach their 2% target rate. Federal Reserve Chairman Jerome Powell reiterated that view on Wednesday, saying it will likely take longer for the central bank to gain this confidence. talk to a reporter.
A delay in rate cuts means mortgage rates could remain high for even longer. The outlook is not easy, and affordability will continue to be a challenge for homebuyers grappling with high home prices.
“30-year fixed-rate mortgages increased for the fifth consecutive week as we enter the heart of the spring home buying season,” said Sam Cater, chief economist at Freddie Mac. “On average, more than one-third of annual home sales occur between March and June. There are still two months left in this historically busy period, but potential home buyers are not immediately They won’t benefit from rising interest rates.”
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Impact of rising interest rates on housing
As mortgage rates remain high, homebuyers are looking for ways to lower costs. Charles Williams, founder and CEO of Percy.AI, says he has seen an increase in proptech solutions, down payment assistance and even interest rate buybacks recently.
“Homebuyers are looking to take advantage of every incentive they can get,” Williams said. “We expect some of these efforts to remain even after interest rates start to fall significantly, but that is unlikely this year.”
Buyers are increasingly turning to adjustable-rate mortgages (ARMs) for discounts. Compared to traditional mortgage products, ARMs offer a lower initial interest rate before adjusting to a higher rate in the future.
“Affordability remains a challenge, with more prospective buyers looking to lower their monthly payments in the short term,” said Bob Bruksmit, president and CEO of the Mortgage Bankers Association. “We are turning to variable rate mortgages for this reason.” “ARM share of applications reached 7.8% last week, the highest level this year.”
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Rising house prices
Buyers waiting for relief from soaring home prices will have to wait even longer. According to the latest S&P CoreLogic Case-Shiller National Home Price Index, home prices are now 6.4% above last year’s level, up from the 6% increase recorded in January. report.
in fact, Fannie Mae recalibrates home price forecasts And we have made upward forecasts, with prices expected to increase by 4.8% annually in 2024 and 1.5% in 2025.
“Buyers are primarily waiting to see if prices also come down to balance things out,” Williams said. “It’s not likely to happen anytime soon. So buyers who can afford to buy homes are buying them, but only if they can compete in this crazy market.”
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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