Real estate agents and home buyers are breathing a sigh of relief as mortgage interest rates dropped this week to an average of 4.3%, down from a two-year high of 4.46% the week before.
Market watchers were aghast the week of June 24th, when the average interest rate on a 30-year fixed rate mortgage jumped from just below 4% to just shy of 4.5% over the course of the five day workweek. This represented the largest one-week rate increase in 26 years, and sent many people applying for mortgages into a panic. This up-tick came on the heels of steady increases in mortgage rates since mid-May, when Federal Reserve chairman Ben Bernanke implied that the Fed may begin easing its bond-buying program known as QE3.
In addition, to a rise in mortgage interest rates, home values (and therefore, prices) have also been on the upswing in recent months. These two factors have led to a lot of nail-biting among people looking to purchase homes, many of whom could be priced out of their desired neighborhoods if these increases continue.
According to USA Today, this week’s decline in rates is due to a substantial drop in mortgage and refinance applications over the past week; for example, refinance applications dipped by 15% over a one-week period. With rates on the rise, many people seem to have been scared out of applying for a mortgage or applying to refinance their existing home loan.
This sudden decline in demand caused rates slipped to a level that is closer to what most homebuyers have become accustomed to in the past few years. However, many experts warn that rock-bottom rates won’t last, and consumers will need to become comfortable with higher rates in the future as economic conditions in the U.S. continue to improve.
People interested in purchasing homes are being advised to start making plans to do so as soon as possible if they hope to take advantage of both low mortgage interest rates and home prices, as neither is likely to remain low for long.
Are you thinking about buying a home soon? Have increasing rates dashed your plans?