Mortgage Rates Dip Below 5%; Buyer Get 'A Second-Chance Opportunity'

After weeks of escalating borrowing costs, home buyers are getting a second chance to lock in lower rates. The 30-year fixed-rate mortgage fell to an average just below 5% for the week ending August 4th, Freddie Mac reports.

With rates dipping in recent days, mortgage applications are increasing for the first time in five weeks, the Mortgage Bankers Association reported this week. Applications for a home purchase increased 1% last week following weeks of declines as home buyers and refinancers got spooled by higher mortgage rates.

Mortgage rates have remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth. The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, especially as the Federal Reserve attempts to naviagate the current economic environment.

The mortgage and longer-term bond markets have settled down in recent weeks. The peak in mortgage rates may have already occurred. That's because oil and gasoline prices have been falling lately and, hence, will lessen broader inflationary pressures. Lower inflation mrans less aggressive interest rates by the Federal Reserve.

Any decline in mortgage rates is likely relief to potential home buyers. Though still higher than a year ago, the current rate of under 5% means around a 12% reduction in monthly payments compared to when mortgage rates peaked at 6% just two months ago. Mortgage rates could soon turn upward but are unlikely to retouch the 6% mark. Any dip should be viewed as a second-chance opportunity.

Freddie Mac reports the following national averages with mortgage rates for the week ending August 4:

• 30-year fixed-rate mortgages: averaged 4.99%, with an average 0.8 point, dropping from last week's 5.30% average. Last year at this time, 30-year rates averaged 2.77%.
• 15-year fixed-rate mortgages: averaged 4.26%, with an average 0.6 point, falling from last week's 4.58% average. A year ago, 15-year rates averaged 2.10%.
• 5-year hybrid adjustable-rate mortgages: averaged 4.25%, with an average 0.3 point, dropping from last week's 4.29% average. A year ago, 5-year ARMs averaged 2.40%.

Freddie Mac reports commitment rates along with average points to better reflect the total upfront cost of obtaining the mortgage.

Works Cited:

Melissa Dittmann Tracey. “Mortgage Rates Dip below 5%; Buyers Get ‘a Second-Chance Opportunity.’” Realtor Magazine, 4 Aug. 2022, magazine.realtor/daily-news/2022/08/04/mortgage-rates-dip-below-5-buyers-get-a-second-chance-opportunity.