Mortgage rates dropped again for the fifth week as inflation data for March showed that it has continued to cool, improving the outlook for homebuyers, according to Freddie Mac.
The average rate for a 30-year fixed-rate mortgage dropped to 6.27% for the week ending April 13, according to Freddie Mac's Primary Mortgage Market Survey. That's down from the previous week when it averaged 6.28%. Mortgage rates, however, remained well above last year when the average was 5%.
The average rate for a 15-year mortgage was 5.54%, down from 5.64% the week before and up from 4.17% last year.
The latest Consumer Price Index (CPI), a measure of inflation, showed that the rate of inflation has continued to decline, with prices rising 5% year-over-year in March, a significant decline from a peak of around 9% last summer.
"Incoming data suggest inflation remains well above the desired level but showing signs of deceleration," Freddie Mac Chief Economist Sam Khater said in a statement. "These trends, coupled with tight labor markets, are creating increased optimism among prospective homebuyers as the housing market hits its peak in the spring and summer."
If you are looking to take advantage of lower mortgage rates by refinancing your mortgage loan, or are ready to shop for the best rate on a loan, consider visiting an online marketplace like Credible to compare rates, choose your loan term and get preapproved with multiple lenders at once.
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The latest inflation numbers renewed optimism that the Fed might stop its monetary policy agenda before midyear, according to Keeping Current Matters Chief Economist George Ratiu.
Minutes from the Federal Reserve's March meeting revealed that members remained concerned about high wage growth and inflation. Both are above rates consistent with the central bank's 2% inflation objective. With prices still rising for shelter, household budgets will remain under pressure; the Fed is not likely to take its foot off the pedal, Ratiu predicted.
"We are likely to see several more 25-basis point rate hikes this year as the Fed aims for its 2% inflation target," Ratiu said in a statement. "The uncertainty over the economic outlook and the Fed's effectiveness in taming inflation without damaging consumer spending will keep the 30-year fixed mortgage rate in the same 6% - 7% range it has been for the past eight months."
Consumers are now adjusting to this new normal range of mortgage rates as evidenced by the recent increase in home purchases, according to CoreLogic's Chief Economist Selma Hepp.
"It is important to remember that there are several economic factors that will continue to keep rates traditionally high for the remainder of the year," Hepp said in a statement. "The bright spot appears to be that recent declines in mortgage rates are bringing homebuyers back and, as a result, we can expect to see an uptick in first-time homebuyer purchases going into the spring homebuying season."
If you want to take advantage of interest rates before they potentially go up, you could consider shopping for the right mortgage. You can visit Credible to speak with a mortgage expert and get your questions answered.
Home prices increased in March as buyers returned to the market, a recent Zillow report said. The average U.S. home saw prices increase 0.9% from February to March, the strongest growth since last June, the report said.
"This month's turnaround confirms that market conditions have swung from a slow seller's market in late 2022 to a typical springtime seller's market, with remarkable speed," Zillow Senior Economist Jeff Tucker said in a statement.
However, a lack of housing supply means willing buyers have few options to consider. March 2023 had 22.3% fewer new listings than last year and 20.2% fewer than March 2020, according to Zillow.
"For buyers and sellers, today's higher borrowing costs are consuming a large share of household incomes," Ratiu said. "While the combination of prices, which are 12% lower than last June's peak, and wages, which are still rising, provides some financial relief, affordability remains a central concern for many people.
"With spring in full bloom, housing markets need significantly more inventory to balance ongoing challenges," Ratiu continued.
The slowdown in home prices and lower interest rates have made buying a home more affordable for some. If you are ready to shop for a mortgage loan or are looking to refinance an existing one, you can use the Credible marketplace to compare rates and lenders and get a mortgage preapproval letter in minutes.
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