Housing News

Mortgage Interest Rates Remain Just Above 6%

While homebuyers and homeowners have been eagerly waiting for mortgage interest rates to drop into the 5% range, rates stubbornly remained just above 6%.

Mortgage rates averaged 6.09% for 30-year, fixed-rate loans in the week ending Jan. 22, according to Freddie Mac data. That was up just slightly from the previous week, when they averaged 6.06%.

However, rates were down almost a percentage point from this time last year, when they averaged 6.96%.

“With the economy improving and the average 30-year fixed-rate mortgage nearly a percentage point lower than last year, more homebuyers are entering the market,” said Freddie Mac Chief Economist Sam Khater in a statement.

Lower rates drove the number of mortgage applications up 14.1% in the week ending Jan. 16, according to the most recent data from the Mortgage Bankers Association. This was compared to the previous week.

Homebuyers submitted about 18% more applications than they did at this time last year. That’s at least partly due to lower rates making buying a home more affordable. More homebuyers can qualify for loans when rates are down and buyers may be able to increase their purchasing power and lower their monthly mortgage payments.

Meanwhile, refinance applications surged. They were up 183% from last year.

Someone who bought a $400,000 home with a $320,000 mortgage may potentially save about $183 a month and roughly $2,000 a year if rates dropped from 6.96% to 6.09%. Over 30 years, that adds up to nearly $66,000.

Which direction mortgage rates will move next remains to be seen.

Rates fell earlier this month after President Donald Trump announced Fannie Mae and Freddie Mac would purchase $200 million of mortgage bonds. The move is designed to bring mortgage rates down, although details on the plan have not yet been released.

“Looking ahead, affordability remains the central issue” for housing, wrote Realtor.com Senior Economist Anthony Smith in an article on the real estate listings portal. “Labor market stability and real wage gains will be needed to support housing demand, but a gradual and uneven recovery remains the likely path forward.”