Mortgage rates may be on the decline, but buyers aren’t convinced it’s the right time to buy. (iStock )
There is good and bad news on mortgage rates this week. The good news is that rates have continued their slow downward trend, averaging 6.87% on 30-year fixed-rate mortgages, Freddie Mac reported.
While this is promising, interest rate cuts are far from the norm. Last week, 30-year mortgages averaged 6.95%. However, compared to a year ago when rates averaged 6.67%, this week’s and last week’s rates are still relatively high. However, any improvement is better than nothing.
“Mortgage rates fell for a third straight week on signs of cooling inflation and market expectations of an upcoming Fed rate cut,” explained Freddie Mac Chief Economist Sam Khater. “These lower mortgage rates along with the gradual improvement in housing supply bode well for the housing market. Aspiring homeowners should remember that it’s important to shop around for the best mortgage rate, as they can change many among lenders.”
On top of 30-year rates, 15-year mortgage rates also dipped this week, but still remain above 6%. Interest rates on 15-year fixed-rate mortgages averaged 6.13%, down slightly from last week when they averaged 6.17%.
If you think you’re ready to shop for a home loan, consider using Credible to help you easily compare interest rates from multiple lenders in minutes.
MANY HOMEOWNERS WOULD BETTER REMODEL THAN BUY ANOTHER HOME: STUDY
The average American must drop over $100,000 to meet the monthly mortgage payment
Down payment requirements are increasing across the country for the average potential home buyer. Middle-class income families need to put down $127,750 on a median-priced home to realistically afford the monthly payments, according to a Zillow study.
This down payment is equal to about 35.4% of a $360,000 home, which is the price of a typical American home. A down payment of this size helps buyers pay no more than 30% of their income for mortgage payments.
Just five years ago, many families could afford their monthly mortgage payments without paying a down payment on their new home.
“Prepayments have always been important, but even more so today,” said Zillow Chief Economist Skylar Olsen. “With so little available, buyers may have to wait even longer for the right home to come on the market, especially now that buyers can afford less. Mortgage rate movements during that time can make the difference between affording that house and not.”
To save up the necessary down payment, it would take many middle-income families 12 years to save. This assumes setting aside 10% of their income – an impossible reality for many people who face high costs in all areas of their lives.
“Saving enough is a tall order without outside help — a gift from family or maybe a windfall,” Olsen said. “To make the finances work, some people are making a big move across the country, co-buying or buying a house with an extra room to rent out. Down payment assistance is another great resource that is often overlooked .”
A site like Credible can let you look at multiple mortgage lenders and offer you customized rates in just minutes, all without affecting your credit.
MILLENNIALS MOST LIKELY TO UNLOCK LOW MORTGAGE RATE TO MOVE: FREDDIE MAC
The desire to buy a home hits an all-time low for potential buyers
Interest may be down to a small degree, but potential buyers don’t seem ready to dive back into the buying market. Fannie Mae’s home buying sentiment index fell 2.5 points in May to 69.4, signaling that buyers are not positive about buying at the moment.
This decline puts the index at an all-time low. In May, only 14% of consumers believed it was a good time to buy a new home, down from 20% in April. Consumers still think affordability will remain difficult for most buyers, at least for the foreseeable future.
“Consumer housing sentiment fell from its recent plateau as a growing share of consumers struggle to find the upside in the current housing market,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “While many respondents expressed optimism at the start of the year that mortgage rates would fall, that simply hasn’t happened and current sentiment reflects pent-up frustration with the general lack of affordability to buy.
“This is most clearly evidenced by our ‘good time to buy’ component falling to a new survey low this month. On the other hand, homeowners’ perception of home selling conditions fell only slightly and remains largely positive after a steady increase over the past few months,” said Duncan.
To see if you qualify for a mortgage based on your current credit score and salary, consider visiting Credible, where you can compare multiple mortgage lenders at once.
FREDDIE MAC OFFERS PRODUCT TO HELP HOMEOWNERS BUILD HOME EQUITY WITHOUT LOSING THE RECORD LOW MORTGAGE COMMUNITY
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