Mortgage rates slip as talk of looming recession heats up

Mortgage rates slipped this week as talk of a looming recession becomes more frequent, according to the latest data from Freddie Mac.

The 30-year fixed-rate mortgage decreased to an average rate of 5.7% for the week ending June 30, according to Freddie Mac’s Primary Mortgage Market Survey. This is down from 5.81% last week but still up from 2.98% last year. 

The average 15-year mortgage rate also decreased to 4.83%, down from 4.92% last week but up from 2.26% last year, according to Freddie Mac. However, the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) increased to 4.5%, up from 4.41% last week and 2.54% last year. 

"The rapid rise in mortgage rates has finally paused, largely due to the countervailing forces of high inflation and the increasing possibility of an economic recession," Freddie Mac Chief Economist Sam Khater said. "This pause in rate activity should help the housing market rebalance from the breakneck growth of a seller’s market to a more normal pace of home price appreciation."

If you want to take advantage of this dip in mortgage rates, you could consider refinancing to reduce your monthly payment. Visit Credible to find your personalized interest rate without affecting your credit score.

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Recession risk heats up

Recent economic reports show a recession could be looming in the months ahead, and all eyes have turned toward July’s GDP reading to see if the U.S. has fallen into a recession. In its latest report, the Bureau of Economic Analysis (BEA) showed the GDP contraction in the first quarter of 2022 was worse than previously estimated. 

"The Freddie Mac fixed rate for a 30-year loan took a breather in the wake of a three-week 72-basis point ascent, declining to 5.7% this week, mirroring the pullback in the 10-year Treasury," George Ratiu, Realtor.com's manager of economic research, said. "With the drumbeat of a possible recession growing louder, investors have been seeking safer assets, driving bond yields lower again this week. 

"Rising prices are eating into consumers’ paychecks, leaving many Americans with less money for discretionary spending," Ratiu said. "In addition, with inflation outpacing pay raises, most workers are seeing their income fall behind, further straining the finances of buyers who are also facing higher borrowing costs."

If you are struggling financially amid today’s economy, you could consider refinancing your mortgage loan to lower your monthly payment. You can visit Credible to compare multiple mortgage lenders at once and choose the one with the best interest rate for you.

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Housing markets ‘headed for a reset’

Mortgage rates have trended upward throughout 2022, and home prices continue to surge. At its current pace, one expert said the housing market is on a path to reset from last year. 

"At the midpoint of 2022, housing markets are clearly headed for a reset, as rising supply is blending with cooling demand," Ratiu said. "The number of homeowners listing their homes for sales has been growing for two straight months compared with a year ago, bringing more options for homebuyers to choose from. 

"The median home price hit a new record in June, reaching $450,000, a 17% gain from last year," he said. "At that price, combined with today’s fixed rate for a 30-year loan, homebuyers are looking at a monthly payment of about $2,100 – before adding in taxes, insurance or fees – more than $790 higher than June of 2021. Not surprisingly, this is taking a toll on transactions, and as properties sit on the market longer, the share of those with price reductions is rising. 

"Looking at the next few months, I expect to see further moderation in transactions, followed by a sharper slowdown in price growth," he concluded. "Buyers and sellers will find themselves on more equal footing, a welcome shift after two years of a severely lopsided market during the pandemic."

If you are interested in buying a home in today’s market or want to refinance your current loan, you could consider using an online marketplace like Credible to help you shop around and get the best rate. You can also contact Credible to speak to a home loan expert and get all of your questions answered.

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