T
he mortgage market is experiencing a welcome respite from the high rates that dominated the early part of the year. According to Freddie Mac, the 30-year fixed-rate mortgage has averaged 6.87% over the past week, marking four consecutive weeks of decreases. This trend is particularly timely as homebuyers begin to enter the spring market, with mortgage applications on the rise.

    "This is a positive development for potential buyers," says Jessica Lautz, deputy chief economist at the National Association of REALTORS. "As housing inventory grows, buyers will find themselves in a more favorable position than they were last year." The 30-year fixed-rate mortgage has reached its lowest level so far this year, with Sam Khater, Freddie Mac's chief economist, noting that recent rate stability is benefiting buyers.

    For homebuyers with a 20% down payment, a $400,000 home would come with a monthly payment of around $2,101 at the current average rate. With a 10% down payment, the typical payment would be $2,364. However, Lautz cautions that while rates may be lower on a weekly basis, overall affordability is influenced by factors like utilities, taxes, and insurance.

    The recent surge in existing-home prices to a record high of $407,500 has forced buyers to reassess their budgets. Freddie Mac reports the following national averages for mortgage rates as of February 13:

    * 30-year fixed-rate mortgages: averaged 6.87%, down from last week's 6.89% average

    * 15-year fixed-rate mortgages: averaged 6.09%, up from last week's 6.05% average

    Inflation remains a challenge for mortgage rates, with the Consumer Price Index rising to 3% in January. The Federal Reserve has maintained that it won't cut its short-term benchmark interest rate until inflation falls to 2% or the economy faces net job losses.

    While the Fed's interest rate doesn't directly impact mortgage rates, it can influence them indirectly. However, so far, the 10-year Treasury yield – which mortgage rates are more closely tied to – has not followed suit when the Fed cuts its rate. NAR Chief Economist Lawrence Yun notes that progress on mortgage rates is only expected to occur when inflation is contained.

    Yun also points out that the inflationary measure for housing showed slight improvement in January, rising at its slowest pace in three years. He suggests that a temporary oversupply of new apartment units could help restrain this component and lead to lower inflation – and ultimately, lower mortgage rates. NAR has forecasted that mortgage rates will likely average between 6% to 6.5% for 2025, although their trajectory will depend on various economic factors.