Mortgage rates continue 3-week decline
Since peaking in November, rates have been up and down — and up and down. Economists say it's hard to predict what's next, but buyers may want to act now.
Key points:
- Mortgage rates fell for a third straight week to 6.32%, the same level seen in mid-February.
- Competing economic factors continue to create an environment of uncertainty, though some signs point to further rate declines.
- Buyers may be responding to the declining rates; mortgage applications were up for the fourth consecutive week.
Mortgage interest rates dipped again this week, with the 30-year fixed-rate average landing at 6.32% according to Freddie Mac's weekly survey.
That's the same rate seen six weeks ago when mortgage rates were climbing, a trend that continued throughout February and into March before rates began to decline over the past three weeks.
"Economic uncertainty continues to bring mortgage rates down," said Sam Khater, chief economist at Freddie Mac. "Over the last several weeks, declining rates have brought borrowers back to the market but, as the spring homebuying season gets underway, low inventory remains a key challenge for prospective buyers."
Where rates go next is anyone's guess
With so many competing economic factors, it's getting difficult for economists to hazard a guess as to where mortgage interest rates go next. And the Federal Reserve is intent on bringing down inflation, which could mean higher interest rates.
"Forecasting mortgage rates in the best of times is tricky. Now, with economic factors tugging rates in different directions, it has become even more difficult to predict where rates will head this spring," said Lisa Sturtevant, chief economist at Bright MLS.
Still, other economic indicators suggest that mortgage rates may decline further, said Sturtevant, which could make the spring homebuying season a little more chaotic as buyers try to take advantage of lower rates.
"We may see more buyers acting opportunistically, making an offer quickly when they see a dip in rates or if they expect an imminent rate increase," Sturtevant said.
Stability of banking sector a wild card
Orphe Divounguy, senior macroeconomist at Zillow Home Loans, said where interest rates go next could depend on the stability of the banking sector.
"Those fears seem to be moderating and a number of leading indicators suggest the U.S. economy is still on solid footing," Divounguy said. "That means inflation may still be slow to come down, leaving the door open for more Fed policy tightening and causing rates to remain elevated."
If the bank woes persist, that could hurt homebuyers this spring.
"More expensive, stricter lending helps to usher in the long-term health of the economy, but the downside is that borrowing for large purchases, including a home purchase, may be relatively more challenging in the short term,"said Hannah Jones, Realtor.com economic data analyst.
With interest rates falling in recent weeks, mortgage applications continued to pick up. Applications rose 2.9% last week compared to the week before, according to data from the Mortgage Bankers Association. This is the fourth week in a row to see an increase in applications.
MBA's Deputy Chief Economist Joel Kan noted that while applications are still more than 30% behind last year's pace, the recent uptick is a welcome development.
"While the 30-year fixed rate remained 1.65 percentage points higher than a year ago, homebuyers responded," Kan said.