Will Lower Mortgage Rates Make Home Buyers More Confident?

So far, however, prospective buyers are remaining cautious. Mortgage rates have been slowly inching down for the last five consecutive weeks, yet loan applications are falling. Mortgage applications to purchase a home—a gauge of homebuying activity—fell 6% in the latest week and reached the slowest pace since the beginning of the year, according to the Mortgage Bankers Association. Still, a more hopeful sign is that applications are 7% higher than a year ago.

Housing Affordability Is Weighing on the Market

“Housing affordability continues to be challenging due to limited housing inventory,” Lautz says. Home prices continue to be at record highs.

At this week’s 6.85% average for the 30-year fixed-rate mortgage, a monthly mortgage payment would be $2,097 for a home priced at $400,000, assuming a 20% down payment, Lautz says. With a 10% down payment, the monthly mortgage payment would be $2,359.

Thirty-year fixed-rates are holding steadier—staying under 7% for five consecutive weeks and fluctuating less than 20 basis points. Prospective buyers may grow more confident to move forward with a purchase as rates have fewer swings week to week. That “stability continues to bode well for potential buyers and sellers as we approach the spring homebuying season,” says Sam Khater, Freddie Mac’s chief economist.

Cash Buyers Remain Elevated

More home buyers are bypassing mortgages altogether. Lautz notes that more than a quarter of home buyers in the last 28 months did not finance their homes. All-cash buyers remain a sizable share of the housing market.

The following are the national averages with mortgage rates for the week ending Feb. 20:

• 30-year fixed-rate mortgages: averaged 6.85%, falling from last week’s 6.87% average. A year ago, 30-year rates averaged 6.9%.
• 15-year fixed-rate mortgages: averaged 6.04%, dropping from last week’s 6.09% average. Last year at this time, 15-year rates averaged 6.29%.