Mortgage rates shift slightly north, but homebuyer demand keeps rising: Freddie Mac

Mortgage rates shifted slightly upwards, keeping rates steadily in the mid-six percent range but still drawing interest from homebuyers, according to Freddie Mac.

The average 30-year fixed-rate mortgage was 6.66% for the week ending Jan. 11, according to Freddie Mac's latest Primary Mortgage Market Survey. That's a slight increase from the previous week when it averaged 6.62%. A year ago, the 30-year fixed-rate mortgage averaged 6.33%. 

The average rate for a 15-year mortgage was 5.87%, down from 5.89% last week and up from 5.52% last year. 

Although mortgage rates increased, the general expectation is that they will stay below 7% this year.  Home prices, on the other hand, show no signs of abating. Nationwide, home prices now stand 4.8% above their year-ago level, while the 10- and 20-city composite indices were up 5.7% and 4.9%, respectively, according to the latest S&P CoreLogic Case-Shiller Indices report.

"Mortgage rates have not moved materially over the last three weeks and remain in the mid-six percent range, which has marginally increased homebuyer demand," Freddie Mac's Chief Economist Sam Khater said. "Even this slight uptick in demand, combined with inventory that remains tight, continues to cause prices to rise faster than incomes, meaning affordability remains a major headwind for buyers. 

"Potential homebuyers should look closely at existing state and local resources, such as down payment assistance programs, which can considerably help defray closing costs."

Homebuyers can find the best mortgage rate by shopping around and comparing options. You can visit an online marketplace like Credible to compare rates, choose your loan term, and get preapproved with multiple lenders at once.

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Mortgage rates to drop slowly

Market expectations were that the Federal Reserve would begin cutting rates as early as its March meeting. Still, December's Consumer Price Index, which showed inflation increased more than expected, could push that further into the distance, according to Realtor.com.

During its December meeting, the central bank announced a third interest rate pause, leaving the federal funds rate at a 22-year high of 5.25% to 5.5%. However, Fed officials hinted that they could begin rate cuts this year, with interest rates expected to drop to 4.6%, according to updated economic forecasts in the central bank's Summary of Economic Projections (SEP). 

A slower timeline for easing mortgage rates will impact the speed at which housing inventory supply builds, according to Realtor.com Economist Jiayi Xu.

"Considering that the pace of decline for mortgage rates is likely to be slower compared to the end of 2023, there is a potential for a slower-than-expected growth in listing activities," Xu said in a statement. "Given that about two-thirds of outstanding mortgages presently carry rates below 4%, a significant portion of individuals might choose to delay selling plans, waiting for the potential for even lower rates to purchase their next residences."

If you are looking to take advantage of the current mortgage rates by refinancing your mortgage loan or are ready to shop for the best rate on a new mortgage, consider visiting an online marketplace like Credible to compare rates and get preapproved with multiple lenders at once.

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Easier access to down payment help

Freddie Mac is leading the initiative to streamline documentation to access its down payment assistance (DPA) programs to connect more lenders and homebuyers to this help. Historically, the various DPA programs had different paperwork, which may have caused confusion and misinterpretation of terms and payment arrangements.

"Saving for a down payment continues to be the largest barrier to homeownership for lower-income and first-time homebuyers," Danny Gardner, single-family senior vice president of mission and community engagement at Freddie Mac said. "We know that standardization has increased efficiency, lowered costs, and improved many areas of the mortgage industry."

"By embracing standardization and creating a set of industry-wide documents, we are providing clarity and consistency that will enable more lenders to help more individuals and families leverage down payment assistance programs across the country," Gardener continued.

If you're looking to become a homeowner, you could still find the best mortgage rates by shopping around. Visit Credible to compare your options without affecting your credit score.

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