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Prospective home buyers may have a magic number in mind when it comes to a mortgage rate they will accept—and most lenders are not even close to reaching it.
More than half of would-be home buyers—56%—say they’re waiting for mortgage rates to fall to a range between 5.5% and 5.75% before making a home purchase, according to HomeLight’s 2024 Lender Insights Report. The national average for the 30-year fixed-rate mortgage was 6.54% this week, Freddie Mac reports.
What’s more, mortgage financing giant Fannie Mae and the Mortgage Bankers Association predicted this week that the 30-year fixed mortgage rate likely will average about 6.2% by the end of 2024. So, some prospective home buyers may have a long wait.
Home buyers continue to express anxiety over high interest rates, despite rates being considerably lower than a year ago, when the avarage approached 8%. Fifty-eight percent of borrowers surveyed by HomeLight called “rising interest rates” their greatest fear in purchasing a home, followed by persistent increases in home prices (49%) and increases in the cost of living due to inflation and shrinking personal savings (40%). Nearly 40% of loan officers surveyed by Homelight reported more borrowers are inquiring about down payment assistance or lower down payment programs, trying to offset the elevated rates and home prices.
This week marks the fourth consecutive week that mortgage rates have increased.
“The continued strength in the economy drove mortgage rates higher once again this week,” says Sam Khater, Freddie Mac’s chief economist. “Over the last few years, there has been tension between a downbeat economic narrative and incoming economic data that is stronger than the narrative. This has led to higher-than-normal volatility in mortgage rates despite a strengthening economy.”
Still, inflation remains high, and just over one in three workers—34%—say they’re living paycheck to paycheck, according to an August survey from Bankrate. Home buyers also face higher home prices, with the median existing-home price in September reaching $404,500, which is nearly 50% higher than September 2019. Further, home price growth has outpaced the 25% growth in income during that same time period, according to National Association of REALTORS® data.
At this week’s 6.54% average for the 30-year loan, a borrower with a 20% down payment who is purchasing a $400,000 home would have a monthly mortgage payment of $2,031, says Jessica Lautz, NAR’s deputy chief economist. With a 10% down payment, they would have a monthly payment of $2,285.
Nevertheless, rates have made monthly payments far cheaper than those of a year ago. “The monthly savings a home buyer could have on a $400,000 home is $270 compared to last year,” Lautz notes. That said, housing affordability constraints continue to press on the market. Existing-home sales fell 3.5% in September compared to a year ago, NAR reported this week. First-time home buyers, who do not have equity to leverage from a previous sale, may be faring the worst. The share of first-timers in the homebuying market fell to 26% in September, one of the lowest readings on record, NAR’s data shows.
Freddie Mac reports the following averages for mortgage rates for the week ending Oct. 24:
- 30-year fixed-rate mortgages: averaged 6.54%, rising from last week’s 6.44% average. A year ago, 30-year rates averaged 7.79%.
- 15-year fixed-rate mortgages: averaged 5.71%, increasing from last week’s 5.63% average. A year ago, 15-year rates averaged 7.03%.
