Benchmark mortgage rates continued their downward trajectory over the past week, following Federal Reserve Chair Jerome Powell’s indications to lawmakers that the central bank wasn’t changing up its strategy anytime soon.
The 30-year fixed-rate mortgage averaged 2.88% for the week ending July 15, down two basis points from the previous week, Freddie Mac
reported Thursday. Since peaking at 3.18% in April, the rate on the 30-year mortgage has now fallen 30 basis points, or nearly one-third of 1%.
The 15-year fixed-rate mortgage increased two basis points to an average of 2.22%, while the 5-year Treasury-indexed hybrid adjustable-rate mortgage fell by five basis points to an average of 2.47%.
“The summer swoon in mortgage rates continues as the 30-year fixed-rate mortgage fell for the third consecutive week,” Freddie Mac chief economist Sam Khater said in the report. “While this decline is not large, it provides modest relief to borrowers who are purchasing in a market with strong home appreciation and scant inventory.”
The movement in mortgage rates over the past week confirmed that the Fed is very much in the driver’s seat when it comes to the trajectory of interest rates these days. While testifying before the Senate, Powell again reiterated his stance that the current spate of inflation would be transitory, indicating that the Fed is set to maintain its current approach on monetary easing.
But keeping short-term interest rates low isn’t the only way the Fed is greasing the skids for the mortgage market. “Just as importantly for loan rates, the Fed is expected to maintain its $40-billion a month mortgage-backed securities purchase volume, which will ensure that low rates remain available to homeowners and buyers,” said George Ratiu, senior economist at Realtor.com.
“In short, the Fed thinks that there is still work to do to get the economy back on track, which will keep mortgage rates low for the remainder of the year,” Ratiu added.
(Realtor.com is operated by News Corp
subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.)
Low rates aren’t the only cause for celebration among home buyers, though. The number of new listings on the market increased 5% last week following a dip around the Fourth of July holiday, according to data from Realtor.com. Now, the total inventory of homes for sale is just 35% lower than a year ago, marking the 14th consecutive week in which the year-over-year declines have shrunk.
Some buyers have likely exited the market as they continued to face steep competition for homes and rising prices. Those who stuck around may face a less stressful home shopping experience in the coming months as inventory improves, reducing the competition for available properties.