Weekly Drop in Rates Saves Buyers $100 per Month
In real-world terms, this week’s mortgage rate drop (from 7.0% to 6.61%) saves typical buyers $1,200 per year – or gives them $12K more in purchasing power.
SEATTLE – This week’s largest drop in mortgage rates in four decades (from 7.0% to 6.61%) coupled with the slowest annual home-price growth since the start of the pandemic is providing some relief for would-be homebuyers’ budgets.
According to a report from Redfin, last week’s better-than-expected inflation report led to the biggest single-day mortgage-rate drop on record and the largest weekly drop since 1981. As a result mortgage-purchase applications shot up 4% from the week before.
The result: A typical monthly mortgage payment nationwide is now $2,430, down from $2,542 with last week’s 7% rates, a savings of roughly $100 per month.
To look at it another way, a homebuyer on a $2,500 monthly budget can afford a $380,750 home with today’s 6.6% rates, giving them $12,000 more purchasing power than they had a week ago. Last week, that same buyer could only afford a $368,750 home.
Still, buyers are facing average mortgage rates that are more than double what they were a year ago.
“The historic drop in mortgage rates is a tick in the ‘good news’ box for the housing market, as lower rates deliver an immediate win for prospective buyers’ pocketbooks,” says Redfin Deputy Chief Economist Taylor Marr. However, “until we see more consistent evidence over time of slowing inflation and a bigger, steadier decline in mortgage rates, we expect the impact to be muted. Pending sales and new listings may stop declining, but they aren’t likely to see a major boost until there’s more certainty that the Fed’s efforts to curb inflation are working.”
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