Mortgage rates dropped last week for the second consecutive week as the economy slowed alongside consumer spending, according to the latest data from Freddie Mac.
The average 30-year fixed-rate mortgage rate decreased 15 basis points to 5.1% annual percentage rate (APR) for the week ending May 26. This was down from 5.25% the previous week but up from 2.95% last year.
The 15-year mortgage rate also dropped to 4.31%, down from 4.43% the previous week but up from 2.27% last year. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) increased to 4.2%, up from 4.08% the previous week and 2.59% last year.
"Mortgage rates decreased for the second week in a row due to multiple headwinds that the economy is facing," Freddie Mac Chief Economist Sam Khater said. "Despite the recent moderation in rates, the housing market has clearly slowed, and the deceleration is spreading to other segments of the economy, such as consumer spending on durable goods."
If you are interested in taking advantage of today's rates, you could consider refinancing your mortgage to lower your monthly payments. Visit Credible to find your personalized interest rate without affecting your credit score.
Homebuyers paying more to buy a home
Although mortgage rates dipped for the second consecutive week, they are still significantly higher than last year. This means that borrowers are dishing out much more money to buy a home than they would have last year, including for a down payment and monthly mortgage payments.
"Investors taking part in the stock market sell-off of the past five weeks have shifted their attention to the debt market, driving up prices on T-bills and mortgage-backed securities," Joel Berner, Realtor.com's senior economic research analyst, said. "This allowed mortgage rates to fall, even amid inflation-cooling policies initiated by the Federal Reserve. Despite the retreat of the last two weeks, the 30-year fixed rate is still 215 basis points higher than it was this week last year: 2.95%.
"In practical terms, a monthly payment on the same $300,000 30-year fixed-rate mortgage is $372 more than it would have been at last year’s rate, but anyone shopping in today’s market will note that $300,000 today doesn’t buy what it used to," Berner said. "The cost of financing a home purchased at the median listing price and current mortgage rate today compared to one year ago is $751 higher, a jump of 48% stemming from the combined impact of higher rates and home prices."
The latest home-price data shows that home values increased by nearly 20% annually in February, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index. In some cities, the increases were even higher — in Phoenix, home prices rose 32.9%.
If you are looking to buy a home, comparing multiple rates and lenders can help you save money on your loan amount. Visit Credible to compare multiple mortgage lenders at once and choose the one with the best interest rate for you.
Fed to continue raising interest rates
The latest minutes from the Federal Reserve revealed that members of the Federal Open Market Committee (FOMC) are planning to raise rates by several more 50-basis-point rate hikes in the coming months.
"Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings," the minutes said.
Members of the FOMC voted to raise the federal funds rate by 50 basis points at its May meeting, the highest rate hike in 20 years. More of these high rate hikes will now follow, pushing interest rates for all credit types higher.
If you want to take advantage of interest rates now before they rise higher, you could consider refinancing your mortgage to save money on your monthly payments and over the life of the loan. To see if this is the right option for you, contact Credible to speak to a home loan expert and get all of your questions answered.
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