Are you dreaming of owning your own home but struggling to keep up with the rising costs? Well, it seems the winds of change are blowing in your favor! For the third week in a row, mortgage rates have been falling faster than a rock dropped off a skyscraper!

Yes, you read that right – this is not an April Fool’s joke! The average rate on a 30-year fixed-rate mortgage has dropped to its lowest levels in 6 weeks. Mortgage buyer Freddie Mac reported today that the average on the benchmark 30-year rate fell for the third straight week, to 6.32%, from 6.42% last week, according to Freddie Mac. So, what does this mean for you as a potential home buyer or seller? Let’s find out!

Mortgage Rates 

The recent decline in mortgage rates is good news for prospective homebuyers, as many were pushed to the sidelines during the past year as the Federal Reserve cranked up its main borrowing rate nine straight times in a bid to bring down stubborn, four-decade high inflation.

“Economic uncertainty continues to bring mortgage rates down,” said Sam Khater, Freddie Mac’s chief economist. “Over the last several weeks, declining rates have brought borrowers back to the market but, as the spring home buying season gets underway, low inventory remains a key challenge for prospective buyers.”

After hitting a 2022 high of 7.08% in November, rates started 2023 trending down. However, they climbed again in February, after robust economic data suggested the Federal Reserve was not done in its battle to cool the US economy and would likely continue hiking its benchmark lending rate.

Last week the Federal Reserve did raise interest rates — by a quarter point — in an effort to continue to fight stubbornly high inflation while taking into account recent risks to financial stability.

In their latest quarterly economic projections, Fed policymakers forecast that they expect to raise that key rate just once more — from its new level of about 4.9% to 5.1%, the same peak they had projected in December.

Home Prices & Supply

Also helping buyers, home prices appear to be leveling off. The national median home price slipped 0.2% from February last year to $363,000, marking the first annual decline in 13 years, according to the National Association of Realtors.

One thing that hasn’t gotten much better is the supply of homes. “Over the last several weeks, declining rates have brought borrowers back to the market but, as the spring homebuying season gets underway, low inventory remains a key challenge for prospective buyers,” said Sam Khater, Freddie Mac’s chief economist.

What Impacts Mortgage Rates?

While the Fed’s rate hikes do impact borrowing rates across the board for businesses and families, rates on 30-year mortgages usually track the moves in the 10-year Treasury yield, which lenders use as a guide to pricing loans. Investor expectations for future inflation, global demand for U.S. Treasurys and what the Federal Reserve does with interest rates can also influence the cost of borrowing for a home.

Treasury yields have fluctuated wildly since the collapse of two mid-size U.S. banks two weeks ago. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, was 3.57% Thursday, but had been above 4% early in March.

What Does The Future Hold?

The housing market outlook remains uncertain because the recent financial market stress has caused banks to tighten lending standards, which could make it harder for prospective homebuyers to borrow. Supply also remains tight, which some economists say could prevent a significant decline in house prices. The recent trend of falling mortgage rates is good news for home buyers and sellers, but there are still challenges that need to be addressed.

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