Mortgage Rates Hit New Low Since May 2023

The struggling housing market may be finally getting the break it needs.

Mortgage rates dropped to the lowest level in more than a year, the Wall Street Journal reported.

The average rate on a 30-year fixed rate mortgage fell by about a quarter percentage point to 6.47 percent, according to a survey of lenders Freddie Mac released yesterday. This is the lowest since May 2023 and the sharpest weekly decline in about nine months, the outlet said.

The trend comes after home sales hit a record low with last year’s count, at its lowest in nearly three decades, the result of low inventory and unattractive interest rates.

Existing-home sales aren’t faring much better. After climbing to a 15-year high of 6.1 million during the pandemic in 2021, sales dropped to 19 percent to 4.09 million by the middle of 2022, the outlet said based on NAR data. That total is the lowest full-year level since 1995, even lower than during the subprime crisis.

Mortgage rates on the decline inspire hope that the housing market will get a much-needed boost, especially to potential buyers who have been turned off by high mortgage interest rates and inflated home prices.

However, last year when rates showed signs of going down, some buyers rushed to the market prematurely, only for rates to go up again. Those with good rates already in place were reluctant to sell and stayed put, pushing inventory down. That lack of inventory drove up home prices, making buying impossible for many prospective buyers.

There is still a gap between old rates and new rates that may be enough to deter buyers who need to sell a home to buy a new one. Economists say that is likely to keep inventory still on the lower side, according to the outlet.

Chief economist at Freddie Mac Sam Khater told the Journal that a varying interest rate isn’t really the problem, “The bigger structural issue is lack of inventory. That’s not going to go away.”

— Christina Previte