A historically sudden decline in mortgage rates could potentially save homeowners significant amounts of money.
Key Details
- Last week saw the largest weekly drop in mortgage rates in nearly 40 years, accompanied by the slowest home-price growth since before the pandemic.
- Real estate company Redfin found that the historic drop in rates could save homeowners as much as $100 per month.
- A better than expected inflation report last week resulted in the largest ever recorded mortgage rate drop in a single day.
- Rates declined from 7.08% to 6.61%.
- The week before, mortgage purchase applications saw a 4% increase.
Why it’s news
Monthly mortgage rate payments are now right around $2,430. The decline not only lowers a buyer’s monthly payment but increases their buying power.
Breaking it down, Redfin said in a press release that “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. That same buyer could have bought a $368,750 home with last week’s 7% rates.”
Despite the drop, mortgage rates remain more than double the rates from a year ago. It’s still too early to tell whether or not the drop will increase buying and selling yet.
The number of pending home sales have been on the decline, largely due to high mortgage rates. Mid-November, Redfin reported that pending home sales saw their largest recorded annual decline at 35%.
Redfin experts don’t anticipate any major changes in the housing market following the mortgage rate drop.
“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,” said Redfin economist Taylor Marr.
