Mortgage rates are recording their biggest monthly decline

Photo (c) Andrii Yalanskyi – Getty Images

Thanks to a big drop in the 10-year Treasury bond yield, the average mortgage rate fell over the past seven days, making a home mortgage affordable.

The Mortgage Bankers Association (MBA) reports that the average contract interest rate for a 30-year fixed rate mortgage with a credit balance ($726,200 or less) decreased to 6.23% from 6.42%. The price on luxury homes is even lower. The rate on 30-year fixed rate mortgages with jumbo loan balances (over $726,200) is reduced to 6.08%.

The rate on FHA loans, typically used by first-time buyers, fell 13 basis points last week to 6.26%. While those rates are higher than last year, they are down from October’s highs of more than 7%.

If you think falling rates might be a sign to start the house hunt again, you’re not left out. The MBA said the lenders had a busy week.

“Mortgage application activity rebounded throughout the first week of January, with refinancing and sales activity increasing by double-digit percentages compared to the previous week, which included the holiday it’s the New Year,” said Mike Fratantoni, senior vice president and CEO of MBA. economist.

But despite those gains, Fratantoni said they remain more than 80% below last year’s pace as anyone considering refinancing their mortgage may have done so. last year it was about 3%.


The builders are offering sales deals

However, those who are interested in buying may find encouragement. If the average mortgage rate drops to 6% the customer will save $237 a month in monthly payments, compared to the October high.

People buying new homes know they can save more. Many home builders are “buying down” the mortgage rate by up to 2% to attract buyers. In November, the National Association of Home Builders said a survey of builders showed 59% of builders were offering incentives, a big increase from September.

In particular, 25% of builders reported paying customer credit, an increase from 13% in September. Twenty-seven percent of homeowners reported paying off their mortgage, an increase from 19% in September.

New home buyers who take a 2% down payment from their builder will save about $376 a month on a $300,000 mortgage. Builders as well as lenders are hoping that the incentives, along with falling prices, will attract some of the customers from the market.

“Mortgage rates are now at their lowest level since September 2022, and are about a percentage point below the mortgage peak last fall,” Fratantoni said. “As we enter the early spring buying season, lower mortgage rates and more homes on the market will help support the potential for first-time home buyers.”

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