Mortgage rates down slightly but not much for homebuyers
Adjustable-rate mortgages offer 'upfront monthly cost savings,' one economist says
Mortgage rates dropped slightly last week, but volatility still remains as the market reacts to ongoing economic uncertainty, Freddie Mac said. (iStock)
Rates for the 30-year mortgage dropped slightly last week but not enough to give homebuyers much of a break from high borrowing costs, Freddie Mac said.
The average rate for a 30-year fixed-rate mortgage dropped to 6.66% for the week ending Oct. 6, according to Freddie Mac's Primary Mortgage Market Survey. This is a decrease from the previous week when it averaged 6.70% but still significantly higher than last year when it was 2.99%.
Rate movements for other loan lengths were mixed last week. The 15-year mortgage rate decreased to 5.90%, down from 5.96% the week before and 2.23% last year. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) increased to 5.36%, up from 5.30% the week before and 2.52% last year.
"Mortgage rates decreased slightly this week due to ongoing economic uncertainty," Sam Khater, Freddie Mac's chief economist, said. "However, rates remain quite high compared to just one year ago, meaning housing continues to be more expensive for potential homebuyers."
If you're buying a home or looking to refinance your current mortgage, you can visit Credible and compare multiple mortgage lenders to find the right option for you.
FEWER HOMEBUYERS ENTERING BIDDING WARS AMID HIGH MORTGAGE RATES: REDFIN
High mortgage rates not triggering a big drop in home prices
The surge in mortgage rates, combined with already high home prices, has cut into homebuyers' budgets, a recent Redfin report said.
In theory, higher rates could trigger a decline in home prices as affordability lessens, to make up for the additional monthly interest costs borrowers have to pay, Redfin said. But that hasn't been the case. While home prices have cooled from their 2022 peak in many cities, they continue to register above 2021 levels, according to the report.
"Soaring mortgage rates are throwing a wrench into prospective buyers' plans," Redfin Senior Economist Sheharyar Bokhari said. "Many would-be buyers are dropping out of the market because they can no longer afford the home they want, resulting in a dramatic dip in home sales.
"For buyers who need a home right now – and can still afford it – compromise is the name of the game," Bokhari said. "Some buyers will choose to sacrifice on location or move further away from the city center so they can get the space they want, while others will settle on a smaller home in their ideal location."
If you think you're ready to shop around for a mortgage loan, you can use the Credible marketplace to help you easily compare interest rates from multiple mortgage lenders in minutes.
MOST HOMEOWNERS FIND RENOVATIONS WORTH IT DESPITE THE EXPENSE, STUDY SAYS
Borrowers can find savings in adjustable-rate mortgages, economist says
Homebuyers looking to buy in the current market seem to have more choices in terms of inventory. Overall, housing supply – including both new and old listings – increased 29% from the same time last year but is still off 2019 levels by more than 40%, according to Realtor.com.
"Today's home shoppers have more choices, but for many, the increased cost of financing and higher home prices mean fewer affordable options," Danielle Hale, Realtor.com's chief economist, said in a statement. "As challenging as it may be to set and stick to a budget in this environment of rising prices and rates, it's more important than ever to do so."
Hale said that homebuyers are turning to adjustable-rate mortgages (ARM) as one way to stay on budget.
"With the spread in rates between the two products larger than has been typical over the last 17 years, the upfront monthly cost savings of leveraging this type of financing have never been larger," Hale said. "Whether an adjustable-rate mortgage will be the better option over the life of the loan is harder to determine and can depend on factors specific to each homebuyer's situation."
If you want to take advantage of the current mortgage rates, you can visit Credible to compare different rates and lenders and find the right option for you.
TIPS FOR FIRST-TIME HOMEBUYERS IN A SELLER'S MARKET
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.