Mortgage rates have taken an interesting turn recently, as they have dropped after a rapid increase that began in March. This recent decline comes as both stuck buyers and first time home buyers are vying for the same properties as a limited supply of homes is available, driving up demand for mortgages.
This shift in mortgage rates is good news for potential home buyers, as it means they may be able to afford a home that had previously been out of their reach. With recent mortgage rates, buyers can lock in an average of 4.22% on a 30-year fixed, according to a recent report from Freddie Mac. That rate is the same as it was in January, and significantly lower than the high of 4.51% experienced in May.
The lack of housing inventory is the main reason why mortgage rates are slipping, with the number of homes for sale currently at a 15-year low. Meanwhile, demand for housing is steady and even growing due to a combination of low mortgage rates, high consumer confidence, and a lower unemployment rate. In addition, the average home price is rising quickly.
While the availability of low mortgage rates makes home ownership more attractive, buyers should use caution. The rise in housing prices has already outpaced wage inflation, which could make many homes unaffordable for buyers in the longer term. Additionally, rising rates will eventually return and could make borrowing costlier once again.
In conclusion, sinking mortgage rates make it a great time for potential home buyers to take advantage. However, buyers should remain mindful of the potential risk of rising mortgage rates in the future and make sure they don’t over extend themselves when taking on a loan.