Today's Paper Arkansas News Legislature Newsletters Core Values Sports Public Notices Archive Obits Puzzles Opinion Story Ideas
ADVERTISEMENT
ADVERTISEMENT

Mortgage rates decline for second week in row

by Michele Lerner The Washington Post | July 8, 2022 at 1:44 a.m.


Mortgage rates headed downward for the second week in a row, giving homebuyers a reprieve after a dramatic climb to nearly 6% that is likely to continue.

According to Freddie Mac data released Thursday, the 30-year fixed rate dropped to an average of 5.30% from 5.70% last week with an average 0.8 point. The average was 2.90% a year ago.

The average for a 15-year fixed-rate mortgage fell to 4.45% from 4.83% with an average 0.8 point. The average was 2.20% a year ago.

The average for the five-year adjustable-rate mortgage decreased to 4.19% from 4.50% with an average 0.4 point. The ARM was 2.52% a year ago. ARMs, which were 9.5% of applications last week, according to the Mortgage Bankers Association, have become more popular with borrowers, doubling since late 2021, when rates were lower.

Federal Reserve actions, including selling off securities and raising the federal funds rate, led to a rapid increase in mortgage rates this year.

"The dip in rates this week isn't the beginning of a trend," said Danielle Hale, the chief economist for Realtor.com. "In fact, long-term interest rates were up again the last couple of days."

Mortgage rates were expected to decline slightly last week because concern about the economy drove investors to seek safer assets, including bonds, Hale said. Mortgage rates typically fall when bond investment increases.

"Mortgage rates reacted abruptly to the last Fed interest rate increase and got ahead of where they need to be in anticipation of further rate increases," Hale said. "The gap between mortgage rates and other interest rates had widened and now they'll narrow a bit."

Still, Hale said, anyone looking to buy a house in the next year or so should expect mortgage rates to remain above 5%.

"Maybe rates will dip to 4% in two or three years, but a lot can happen between now and then, so it's difficult to predict," she said.

Sam Khater, chief economist at Freddie Mac -- the Federal Home Loan Mortgage Corp. -- said in a statement that the dip in rates would not have a big effect on buyers.

"Over the last two weeks, the 30-year fixed-rate mortgage dropped by half a percent, as concerns about a potential recession continue to rise," Khater said. "While the drop provides minor relief to buyers, the housing market will continue to normalize if home price growth materially slows due to the combination of low housing affordability and an expected economic slowdown."

The potential risk of recession influenced mortgage rates last week and could affect future Fed interest rate changes, according to Paul Thomas, Zillow's vice president for capital markets.

"Investors are pricing in more risk of economic slowdown and a potential recession, which may slow the pace of future interest rate hikes at the Federal Reserve," Thomas said in a statement.


Print Headline: Mortgage rates decline for second week in row

ADVERTISEMENT

Sponsor Content

ADVERTISEMENT
ADVERTISEMENT