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The Federal Reserve’s recent interest rate cut didn’t affect mortgage rates in the latest week. The 30-year fixed-rate mortgage continued to average 6.78% this week, still biting into many prospective home buyers’ budgets.
“After a six-week climb, rates have leveled off, but overall affordability continues to be an issue for potential home buyers,” says Sam Khater, Freddie Mac’s chief economist. The share of first-time home buyers has shrunk to all-time lows this year, at just 24%, significantly less than the typical 40% market share for home sales by first-time buyers, according to recent research from the National Association of REALTORS®.
At this week’s 30-year mortgage rate of 6.78%, a monthly mortgage payment would average about $2,082 on a home priced at $400,000, with a 20% down payment. After a 10% down payment, the typical payment would be $2,342, says Jessica Lautz, deputy chief economist of the National Association of REALTORS®.
Despite two one-quarter-point Fed rate cuts this fall—the latest one occurring last week—mortgage rates have remained elevated over recent weeks. However, the Fed’s benchmark short-term lending rate is not directly tied to mortgage interest rates, which are more closely tied to the 10-year Treasury—which did post an increase last week, Lautz says.
Real estate professionals often remind their prospective home buyers that they can always refinance their mortgage if rates dip lower. Still, the latest housing inventory gains could offer them more choices in homes for sale after years of shortages and steep competition from other buyers. “Late fall and winter months are traditionally more favorable for first-time buyers as families bow out” of their home search during the early part of the school year, Lautz said.
Lawrence Yun, NAR’s chief economist, predicted last week during a session at NAR NXT, The REALTOR® Experience, in Boston that mortgage rates likely will moderate somewhat over the next two years, hovering in the low 6% range.
Freddie Mac reports the following national averages for the week ending Nov. 14:
- 30-year fixed-rate mortgages: averaged 6.78% this week, dropping slightly from last week’s 6.79% average. A year ago, 30-year rates averaged 7.44%.
- 15-year fixed-rate mortgages: averaged 5.99%, falling from last week’s 6% average. A year ago, 15-year rates averaged 6.76%.
