In a week, mortgage rates fell for the first time, but interest rates remain near the highest level in nearly two decades, affecting potential homebuyers thousands of dollars.
This week, mortgage lender Freddie Mac said the average rate of the 30-year loan this week slid to 6.71% from 6.79% the highest level since they briefly surged above 7% in the fall.
But, he added, the rate is still well above the 5.23% reported a year ago and the pre-pandemic average of 3.9%.
Incoming data suggest inflation remains well above the desired level, but showing signs of deceleration, said Sam Khater, Freddie Mac's chief economist. The housing market, with its tight labor conditions, is generating more confidence among potential home buyers as the market hits its peak in the spring and summer. The housing market has shown early signs of reviving, as rates have slowly dropped from a peak of 7%. The return to lower mortgage rates hasn't been seamless, said John Cameron, the head of the mortgage industry.
To calculate how volatile increases and decreases in rates could affect the typical cost of a monthly mortgage, refer to the following table.
Even just a minor shift in rates can affect how much would-be homebuyers pay each month.
A recent study by LendingTree compared the average monthly payments on 30-year fixed-rate mortgages in April 2022, when the rate hovered around 3.79% and one year later, when rates rose to 5.25%.
The survey found that higher rates would cost borrowers hundreds more each month and potentially add as much as $75,000 over the life of the 30-year loan.
The increase in mortgage rates comes as wages fight to crush high inflation, raising interest rates at the fastest rate in decades in a bid to cool the economy and tame runaway prices.
Although the federal funds rate does not directly affect consumer borrowing costs, it impacts borrowing costs, such as home equity lines of credit, auto loans and credit cards.