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Mortgage Rates Influencing Homebuyers

loan defects in application formThe 30-year fixed mortgage rate averaged 3.55% as of August 22, according to the latest Freddie Mac Primary Mortgage Market Survey. This is the lowest rate Freddie Mac has recorded since November 2016. 

The 30-year FRM declined by 0.5 percentage points from the previous week’s rate of 3.60%. The 15-year FRM and 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) declined as well, down to 3.03% and 3.35%, respectively.

“The drop in mortgage rates continues to stimulate the real estate market and the economy,” said Sam Khater, Freddie Mac’s Chief Economist. “Home purchase demand is up 5% from a year ago and has noticeably strengthened since the early summer months, while refinances surged to their highest share in three and a half years. Households that refinanced in the second quarter of 2019 will save an average of $1,700 a year, which is equivalent to about $140 each month.”

“The benefit of lower mortgage rates is not only shoring up home sales, but also providing support to homeowner balance sheets via higher monthly cash flow and steadily rising home equity,” he continued.

While lower mortgage rates may influence some potential buyers to move ahead, inventory continues to stifle the market. Data from Fannie Mae's Economic and Strategic Research Group found that limited inventory, especially for affordable housing, continued to remain a challenge for homebuyers. This, despite Fannie Mae's latest Home Purchase Sentiment Index suggesting strong homebuyer interest after recording a new survey high in July.

The report also suggested an uptick in refinance activity as mortgage rates nearing new lows. The report indicated that the share of refinancing activity had risen from 29% in 2018 to 35% in 2019.

“Mortgage rates are approaching the lowest level in recent decades, and as they have moved lower more and more homeowners are finding incentive to refinance,” Duncan said. “We estimate that 35% of outstanding mortgages are now ‘in the money,’ meaning borrowers may realize significant cost savings by refinancing; as such, we expect the share of refinance originations to grow through the remainder of the year.”

About Author: Seth Welborn

Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer.
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