Mortgage rates in the US are slipping again

Mortgage rates in the US fell for a fourth straight week.

The average for a 30-year, fixed loan was 6.28 per cent, down from 6.32 per cent last week and the lowest in almost two months, Freddie Mac said in a statement on Thursday (Apr 6). Treasury yields that guide mortgage rates have slid as recent data releases signalled a potential slowdown in economic growth.

After peaking at just over 7 per cent last year, borrowing costs are again approaching 6 per cent, a “key threshold” for homebuyer confidence, according to Scott Buchta, head of fixed-income strategy at Brean Capital. A one percentage point drop in rates equates to a 10 per cent decline in principal and interest payments and an 11 per cent increase in purchasing power, Buchta said.

Cheaper mortgages and softening prices may coax more house-hunters off the fence during the prime spring selling season in the US. But they may have trouble finding attractive deals in many areas where listings for move-in-ready homes are scarce.

Rates may have to drop quite a bit more to spur a meaningful gain in inventory. Most current homeowners have mortgages below 4 per cent, according to data from Black Knight, giving them little incentive to move and trade up to more-expensive loans.

At the current 30-year average, monthly payments for a US$600,000 loan would be US$3,706. That’s about US$1,100 more than at the start of last year, when rates were close to 3 per cent. BLOOMBERG