Mortgage rates ticked slightly up, still hovering within the 6% to 7% range, but home sales show buyers are shrugging off the more expensive borrowing costs, according to Freddie Mac.
The average 30-year fixed-rate mortgage increased to 6.71% for the week ending June 29, according to Freddie Mac's latest Primary Mortgage Market Survey. That's up from the previous week when it averaged 6.67%. A year ago, the 30-year fixed-rate mortgage averaged 5.7%.
The average rate for a 15-year mortgage was 6.06%, up from 6.03% last week and up from 4.83% last year.
The slight shift marks another week that rates remain within the 6% to 7% range. However, a recovery in home sales may indicate that buyers are accepting the higher borrowing costs as the new normal, according to Freddie Mac Chief Economist Sam Khater.
"Mortgage rates have hovered in the six to seven percent range for over six months and, despite affordability headwinds, homebuyers have adjusted and driven new home sales to its highest level in more than a year," Khater said. "New home sales have rebounded more robustly than the resale market due to a marginally greater supply of new construction.
"The improved demand has led to a firming of prices, which have now increased for several months in a row," Khater continued.
If you are looking to buy a home, you can take advantage of lower mortgage rates and shop for the best rate on a loan. You can visit an online marketplace like Credible to compare rates, choose your loan term and get preapproved with multiple lenders at once.
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Federal Reserve Chair Jerome Powell said in a recent statement that inflation remains high and the process of getting it to a 2% target rate "has a long way to go."
The central bank has already raised rates 10 times in 2022 and 2023 to bring inflation down to a 2% target. In June, it announced a much-anticipated pause on interest rate increases following continued moderation in inflation.
The interest rate increase means the federal funds rate will remain in a targeted range of 5% to 5.25%, the highest level in 16 years.
"With the Fed taking a breather from monetary tightening until its July meeting, capital markets are assessing the outlook for the second half of 2023," Keeping Current Matters Chief Economist George Ratiu said in a statement. "On the upside, even with interest rates more than double what they were at the start of 2022, the economy continues to expand as consumers – buoyed by jobs and rising wages – manage to spend more on goods and services.
"On the downside, the Federal Reserve has been clear that inflation is still hotter than desired, and additional rate hikes are on the table," Ratiu continued. "Based on the central bank's forward guidance, we can expect two more rate increases in the months ahead."
Despite the continued pressure on interest rates, mortgage rates are still expected to drop near 6% by the end of 2023, Realtor.com Chief Economist Jiayi Xu said in a statement.
If you're trying to find the best mortgage rate, it can help to shop around. Visit the Credible marketplace to compare options from different lenders at once without affecting your credit score.
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Demand for affordability is driving the construction of more homes priced under $300,000, according to a report by Realtor.com. Early estimates in May indicate that homes within this price range constituted approximately 17% of total sales, marking the highest share since December 2021 (18%).
"Despite this encouraging news, there remains an urgent need for more homes at the most affordable price points, where the shortage of available inventory is most severe," Xu said.
If you are ready to shop for a mortgage, you could get a better rate by looking at several lenders. Credible can help you compare interest rates from multiple mortgage lenders and choose the one with the best rate for you.
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