Housing News

Mortgage Interest Rates Rise, but Housing Market Conditions Continue to Improve

Mortgage interest rates moved higher this week, although improving affordability and a growing number of homes for sale continue to create more opportunities for prospective homebuyers.

The average rate on a 30-year, fixed-rate mortgage rose to 6.55% for the week ending July 16, according to Freddie Mac. That was up from 6.49% a week earlier but remained below the 6.75% average recorded at this time last year.

A lower-than-expected government inflation report earlier in the week briefly raised hopes that mortgage rates would continue to ease. Those expectations faded as renewed tensions in the Middle East pushed oil prices and long-term borrowing costs higher.

“Mortgage rates are caught between cooler inflation data and renewed energy risks,” said Zillow senior economist Kara Ng in a statement. “Softer June inflation reduced the likelihood of a near-term Federal Reserve rate increase, but higher oil prices are keeping pressure on the inflation outlook and borrowing costs.”

Even with this week’s increase, borrowing costs remain lower than they were a year ago.

A homebuyer purchasing a $400,000 home with 20% down would pay about $55 less per month than they would have paid at this time last year.

At this week’s average rate of 6.55%, the monthly principal and interest payment comes to roughly $2,032, compared with about $2,087 when rates averaged 6.75% a year ago.

Over 12 months, that’s about $660 in savings, or roughly $20,000 over the life of a 30-year, fixed-rate loan.

Recent mortgage application data suggests some homebuyers pulled back as borrowing costs increased. Purchase applications fell 7% from the previous week and slipped 2% below the same week a year earlier, according to the Mortgage Bankers Association (MBA).

Refinance applications, however, rose 4% from the prior week and remained 7% above year-ago levels.

“Purchase application demand has weakened recently, but housing affordability is more favorable and housing inventory continues to rise,” said Sam Khater, Freddie Mac’s chief economist, in a statement. “Thus the backdrop for prospective homebuyers is modestly improving.”