Even a small increase or decrease in interest rates can make an impact on monthly housing costs, which could, in turn, drive a potential buyer’s ability to afford to purchase a home.
In some parts of the country, the combination of rising interest rates and rising home prices had brought some difficulties for buyers, causing some to put off purchasing a home and creating a noticeable drop in mortgage applications. However, the recent dip in mortgage rates is bringing some relief to the current real estate market.
Interest rates for a 30-year fixed rate mortgage consistently rose throughout 2018, until around mid-November. After that point, rates returned back down to close out the year at 4.55 percent, according to Freddie Mac’s Primary Mortgage Market Survey.
Lower Mortgage Rates for 2019 and Rising Mortgage Applications
Rates have continued their downward trend into 2019, and this is great news for potential homebuyers. Between the first and second weeks of January, the average rate for a 30-year fixed fell from 4.51 to 4.45 percent. Those lower mortgage rates, coupled with a slight slowdown in home appreciation to help ease affordability challenges, is great news for potential homebuyers trying to purchase their next (or first!) home. And those potential homebuyers are definitely excited for the great news, as evidenced by a sharp increase in mortgage applications. According to Sam Khater, Freddie Mac’s chief economist, “Mortgage rates fell to the lowest level in nine months, and in response, mortgage applications jumped more than 20 percent. Lower mortgage rates combined with continued income growth and lower energy prices are all positive indicators for consumers that should lead to a firming of home sales.”
If mortgage applications jumped more than 20 percent, it’s clear that these low-interest rates are really making a positive impact on the market in 2019 so far. It’s also clear that buyers are aware that this is a great time to get back in the market!
According to the latest predictions from Fannie Mae and the Mortgage Bankers Association, mortgage rates will still rise during 2019, just not at the same pace that they did in 2018.
What Will the Spring Bring?
Time will tell what kind of market we will see come spring, but it’s clear that the lower mortgage rates have ensured that the demand is still there to help drive the market. Hopefully, the homeowners ready and able to sell will also increase as we approach warmer weather, as a moderate inventory increase would help ease the stressful lack of inventory we’ve been seeing as of late.
