Mortgage rates in US drop to 5.25%, first decline this month

US mortgage rates slipped slightly, the first decrease since late April, as the housing market adjusts to a central bank working to stifle the hottest inflation in more than 4 decades.

The average for a 30-year loan dropped to 5.25 per cent from 5.3 per cent last week, Freddie Mac said in a statement on Thursday (May 19). Even with this week’s drop, mortgage rates have climbed rapidly from 3.11 per cent at the end of last year. 

The Federal Reserve is moving to quickly address inflation by raising rates. That is pushing up mortgage costs and starting to pressure the housing market. A new Redfin report said that 61 per cent of home offers faced bidding wars in April, down from 67% during the same period of 2021. US new-home construction slipped in April as the industry faces challenges from supply and labour shortages. 

“Economic uncertainty is causing mortgage rate volatility,” Sam Khater, Freddie Mac’s chief economist, said in the statement. “As a result, purchase demand is waning, and homebuilder sentiment has dropped to the lowest level in nearly 2 years. Builders are also dealing with rising costs, meaning this posture is likely to continue.”

At the current 30-year average, a borrower with a US$300,000 mortgage would pay US$1,657 a month, roughly US$374 more than at the end of last year. BLOOMBERG