30-year mortgage rate sees largest decrease since March

The 30-year mortgage saw its largest decrease last week since March after weeks of climbing, according to Freddie Mac. (iStock)

The 30-year fixed-rate mortgage decreased last week, dropping by the most since March as economic uncertainty lingers, according to the latest data from Freddie Mac.

The 30-year mortgage decreased by five annual basis points to 5.25% percentage rate (APR) for the week ending May 19, according to Freddie Mac’s Primary Mortgage Market Survey. This is down from 5.3% the week before but up from 3% last year.

The 15-year mortgage also decreased to 4.43%, down from 4.48% the previous week but up from 2.29% last year. However, the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) increased to 4.08%, up from 3.98% the week before and 2.59% last year.

“Economic uncertainty is causing mortgage rate volatility,” Freddie Mac Chief Economist Sam Khater said. “As a result, purchase demand is waning, and homebuilder sentiment has dropped to the lowest level in nearly two years. Builders are also dealing with rising costs, meaning this posture is likely to continue.”

If you are interested in taking advantage of current mortgage rates during this drop, you could consider refinancing to save money on your monthly payments and over the life of the loan. Visit Credible to find your personalized interest rate without affecting your credit score.

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Mortgage rates could still rise further

Although mortgage rates dropped last week, one economist said the decrease could be short-lived as more rate hikes from the Fed are likely to bring higher interest rates in the months ahead.

“The Freddie Mac fixed rate for a 30-year mortgage fell 5 basis points this week to 5.25%, the largest decrease since early March, as rates have steadily climbed this year,” Realtor.com Economic Data Analyst Hannah Jones said. “Federal Reserve Chair Jerome Powell continues to emphasize his commitment to a 2% inflation target, reiterating his willingness to continue raising interest rates until the goal of healthy prices is achieved.

“This commitment to tighter monetary policy continues to shake financial markets as investors try to determine how inflation, rising interest rates, and ongoing concerns in China and Ukraine will impact economic growth,” Jones said.

The Federal Reserve raised interest rates at its May meeting by 50 basis points, after having raised them by 25 basis points at its March meeting. The Fed has also said it plans to continue raising interest rates several more times this year and in 2023 to help combat rising inflation.

“Yields on 10-yr Treasury notes saw variability this week, surging close to 3% in the beginning of the week before settling below 2.9% in the second half of the week as investors looked for stability amidst the challenging incoming data,” Jones said . “The Federal Reserve’s monetary tightening is having the intended effect of cooling housing demand, allowing the market to begin normalizing.”

If you are interested in taking advantage of mortgage rates before they rise further, you could consider refinancing to lower your monthly mortgage payments. Visit Credible to compare multiple mortgage lenders at once and choose the one with the lowest rate for you.

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Homebuyers struggle as prices rise

Rising home prices and mortgage interest rates are making it less affordable for borrowers to purchase a home, Jones said. This has resulted in two scenarios for homebuyers: They drop out of the housing market completely, unable to cope with rising costs, or they put more money down or find another way to manage costs as competition decreases.

“Record-breaking and still-rising home prices, climbing mortgage rates and low inventory continue to put pressure on homebuyers,” Jones said. “However, some hope is on the horizon as the market boasts more insurances year-over-year for the first time since March 2019. While this development is positive for buyers who have been waiting for their moment, it is the result of rising housing costs pushing many buyers out of the market altogether.

“Shoppers who are determined to find their perfect home will likely continue to utilize sizable down payments or even relocation to lock in affordable monthly payments,” she said. “However, for buyers who are unable to content with higher prices and climbing mortgage rates, still-high inflation and rental prices offer little relief.”

If you are looking to buy a home in today’s market, comparing multiple rates and lenders can help ensure you get the best option available for you. For any mortgage-related concerns, you can contact Credible to speak to a home loan expert and get all of your questions answered.

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.

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