Housing News

Mortgage Rates Rise Slightly, But It May Still Be Easier to Buy a Home This Spring

Mortgage interest rates continued to rise as the war in Iran persisted.

Rates ticked up to an average of 6.37% for 30-year, fixed-rate loans in the week ending May 7, according to Freddie Mac data.

That is higher than last week, when rates averaged 6.3%. But it was still well below last year at this time, when rates averaged 6.76%.

“Renewed conflict in the Middle East rattled financial markets and pushed borrowing costs higher,” Realtor.com Senior Economic Research Analyst Hannah Jones wrote in a post.

“After a brief period of optimism that rates might finally be settling down, this fresh escalation [in the Strait of Hormuz] served as a reminder that the path to lower rates runs squarely through the Persian Gulf right now,” she wrote.

Homebuyers submitted 3% fewer applications in the week ending May 1 compared to the previous week, according to the not seasonally adjusted data from the Mortgage Bankers Association (MBA). However, applications were 5% higher than this time a year ago.

Applications from current homeowners to refinance their loans were similarly down 5% from the previous week.

But homeowners seized on lower rates this spring compared to last year. Refinance applications were up 29% year-over-year, according to MBA.

“The ongoing conflict in the Middle East continues to push rates higher,” said MBA Deputy Chief Economist Joel Kan in a statement. “Potential first-time buyers, and buyers looking for homes at lower price points, might be the most hesitant to move forward given the economic uncertainty and higher rates.”

Small changes in interest rates can have a big impact on the size of monthly mortgage payments.

For instance, homebuyers who purchased a $425,000 home with 20% down and a 6.37% would pay about $87 less a month than they would last year with a 6.76% rate. That’s a savings of nearly $1,050 annually and almost $31,500 over the life of a 30-year, fixed-rate loan.

“Recent data points to slightly better conditions for buyers with a boost in new-home sales, median new-home prices being down to their lowest level since July 2021, and higher inventory than in recent years,” said Freddie Mac Chief Economist Sam Khater in a statement.

“Together, these trends could modestly ease affordability pressures through the spring homebuying season,” he said.