Housing News

Mortgage Rates Inch Down, Showing the Housing Market Some Love

Mortgage interest rates are showing homebuyers and homeowners a little bit of love this Valentine’s Day.

Rates dipped down to an average 6.09% for 30-year, fixed-rate loans in the week ending Feb. 12, according to Freddie Mac. Interest rates decreased slightly from an average of 6.11% in the previous week.

And they notched a big drop from 6.87% a year ago.

“Bolstered by strong economic growth, a solid labor market, and mortgage rates at three-year lows, housing affordability continues to measurably improve,” said Freddie Mac Chief Economist Sam Khater in a statement.

“These factors have caught the attention of many prospective homebuyers, driving purchase application activity higher than a year ago,” he said.

Buyers purchasing a $400,000 home, with 20% down, could save about $164 a month with lower mortgage rates than they could have a year ago when rates were higher. That adds up to nearly $2,000 in savings a year and roughly $59,000 over the life of a 30-year, fixed-rate loan.

Homebuyers submitted 4% more applications in the week ending Feb. 6 than they did both the previous week and a year ago, according to the Mortgage Bankers Association (MBA).

“Lower rates are a positive sign for homebuyers who have been waiting to get into the market,” said Lisa Sturtevant, chief economist of Bright MLS. The multiple listing service covers the mid-Atlantic region.

The relative stability of mortgage rates over the last few weeks is also likely to move some potential buyers off the sidelines, she said. Buyers don’t want to worry about whether their payments will rise by the time they have an offer accepted.

“Homebuyers will be more likely to want to get into the market if they have more confident expectations about what rate they will be able to get,” Sturtevant said.

Meanwhile, homeowners also cashed in on this opportunity to lock in lower rates to bring their monthly housing payments down.

Refinance applications were up 101% from a year earlier, according to MBA.

Declining rates could also encourage more owners to become sellers, as most sellers are also buyers.

“Falling rates could lead to more supply,” said Sturtevant. “Some would-be sellers have been waiting to sell…[and are] holding out for a better rate when they go to make their next home purchase.”