Mortgage rates continued their downward plunge this week as inflation keeps decelerating.
The 30-year fixed-rate mortgage averaged 6.63% as of Feb. 1, a decrease from last week’s figure of 6.69%, according to Freddie Mac’s Primary Mortgage Market Survey released on Thursday. Meanwhile, the 15-year fixed rate averaged 5.94% this week, down from 5.96% during the prior week. But HousingWire’s Mortgage Rates Center showed that Polly’s average 30-year fixed rate for conventional loans was 6.950% on Thursday, up from 6.713% at the same time last week.
“Although affordability continues to impact homeownership, the combination of a solid economy, strong demographics and lower mortgage rates are setting the stage for a more robust housing market,” Freddie Mac chief economist Sam Khater said in a statement.
“Mortgage rates have been stable for nearly two months, but with continued deceleration in inflation, we expect rates to decline further.”
Khater added that the solid jobs market, income growth and household formation growth should provide strong fundamental support to the housing market in the months ahead.
The Federal Reserve decided to leave its short-term policy interest rate unchanged during its meeting on Wednesday. But investors anticipate that the central bank will begin cutting rates this spring. Mortgage rates are also expected to come down this year, according to Bright MLS chief economist Lisa Sturtevant.
Is the housing market normalizing?
Since mortgage rates started to decline, economists noticed a positive uptick in housing activity. In December, both pending home sales and new home sales surged. Simultaneously, listing activity also picked up, signaling that sellers are sensitive to the rates as well.
But inventory is likely to remain low as sellers may respond more slowly than anticipated, Realtor.com economist Jiayi Xu said in a statement.
Falling rates are not a direct solution to the housing affordability crisis. In theory, lower mortgage rates should result in lower monthly payments, assuming that home prices don’t increase. But lower rates also might draw more buyers into the market, adding to competition and putting upward pressure on prices.
