US mortgage rates slip to 6.66%, the first drop in 7 weeks
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MORTGAGE rates in the US fell, shifting direction after a six-week streak of gains that sent borrowing costs to a 15-year high.
As benchmark Treasury yields eased this week, the average for a 30-year, fixed loan dropped to 6.66 per cent, Freddie Mac said in a statement on Thursday (Oct 6). A week earlier, rates reached 6.7 per cent, the highest point since 2007.
Even with the latest decline, mortgage costs have more than doubled since starting the year around 3 per cent – a steep climb that has slammed the brakes on the pandemic housing rally, highlighting one of the Federal Reserve’s goals in its effort to cool the hottest inflation in decades.
With more would-be buyers getting pushed to the sidelines, home prices are slipping and sellers are becoming increasingly reluctant to list their properties.
The monthly payment on a US$300,000 mortgage now would be US$1,928 – US$627 more than in January, when the 30-year average was 3.22 per cent.
With the Fed signalling more increases to its benchmark rate, mortgage costs are expected to remain high in a volatile market till the end of the year, said Nicole Bachaud, an economist at Zillow.
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If rates were to reach 7 per cent, that would force about 68 per cent of prospective buyers to pause their home searches, a recent Zillow survey showed.
“Rates are changing day to day, week to week,” Bachaud said. “So a lot of buyers are really confused, saying ‘I went to go put an offer on this house because I could afford it yesterday, and now today I can’t afford it.’”
Current owners are also paralysed by higher rates: They are staying put because buying a new home would require trading a cheaper loan for a more expensive one.
Any decrease in mortgage rates, such as this week’s drop, is hopeful news for both buyers and sellers looking for a way into the market, noted Bachaud.
“Affordability is really the name of the game in any way,” she added. BLOOMBERG
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