The timing couldn't be better: Home-buying season is in full swing and mortgage rates are at their lowest since March.
The average interest rate on a 30-year fixed-rate mortgage for the week ending July 18 was 6.67%, down 10 basis points from the previous week's average. A basis point is one-one-one-hundredth of a percentage point. The average interest rate for the week was the lowest since the week ending March 14, according to rates provided to NerdWallet by Zillow.
Interest rates fall in line with inflation
Interest rates tend to rise when overall prices are soaring and fall when prices are stable. You only have to look at your grocery receipt to see that inflation has been uncomfortably high for years. The good news is that the Consumer Price Index fell below 3% in June for the first time since March 2021. It was only just a little below 3%, at 2.97563%. But a win is a win.
With inflation subsiding, mortgage rates are trending in the right direction. 30-year mortgage rates have fallen a little over 0.25 percentage points in the past two weeks. On a $400,000 loan, that difference in interest rate translates to a savings of $72 per month.
The peak period for home sales is May through August, and interest rates this week are the lowest so far this homebuying season. Interest rate relief may be enough to encourage some buyers to make an offer if they can find the right home at an affordable price. While the inventory of homes for sale has increased this year, buyers still have fewer properties to choose from than before the pandemic.
For some, this is a refinancing opportunity
Lower interest rates haven't sparked a home-buying frenzy, but they have prompted many people to refinance their mortgages, according to the Mortgage Bankers Association, which said refinancing rose 15% in the week that ended July 12. “Most of the increase was driven by FHA and VA refinance applications, which were likely funded recently and at rates even higher than current offering rates,” Joel Kann, deputy chief economist at the MBA, said in a news release.
In fact, interest rates hovered above 7.5% from October to early November of last year. For those who took out a mortgage then, refinancing may be attractive. For a $400,000 loan, this week's average interest rate of 6.67% would result in monthly payments of $224 less than on a 7.5% loan. If you took out a mortgage last fall, it's probably not too soon to refinance.
The article “Weekly Mortgage Rates Fall to Four-Month Low” originally appeared on NerdWallet.
