The 30-year fixed-rate mortgage averaged 5.13% in the week ending August 18, down from 5.22% the week before, according to Freddie Mac. Despite the recent decline, rates are still significantly higher than that period last year, when the 30-year was 2.86%.
“Inflation appears to have passed its peak, which has halted the rapid increase in mortgage rates that the housing market saw earlier this year,” said Sam Khater, chief economist at Freddie Mac.
“The market continues to absorb the cumulative effect of large increases in prices and rates that have led to lower affordability,” Khater said. “As a result, it is likely that purchase demand will continue to decline during the remainder of the year, supply will increase slightly, and house price growth will slow.”
Mortgage application activity last week was lower than the previous week and total applications fell to their lowest levels since 2000, according to the Mortgage Bankers Association.
“Home orders continued to fall due to a rapid lack of demand, as high mortgage rates, challenging affordability, and a bleaker outlook for the economy kept buyers on the sidelines,” said Joel Kahn, associate vice president of economic and industrial forecasting at the MBA. “. .
However, he said, if home price growth slows significantly and mortgage rates drop, buying activity may pick up again later in the year.
However, affordability remains a challenge for many potential homebuyers, especially when compared to the cost of home financing just last year.
A year ago, a buyer who paid 20% on a $390,000 home and financed the rest with a 30-year fixed mortgage at an average interest rate of 2.86% would get a monthly mortgage payment of $1,292, according to Freddie Mac’s calculations.
Today, a homeowner who buys a home at the same price will pay an average price of 5.13% at $1,700 A month in principal and interest. That’s roughly $408 more every month.