Mortgage rates experienced their largest weekly drop in nearly 40 years this week, easing potential buyers’ monthly payments.
The 30-year fixed rate fell to 6.61 percent, declining by nearly half a percentage point from a week earlier after a report showing softer than expected inflation.
This historic drop could save buyers more than $100 each month, according to an analysis from the real estate company Redfin.
Now the typical monthly mortgage payment across the U.S. is $2,430, down from $2,542.
But Redfin deputy chief economist Taylor Marr cautioned that the overall impact could be muted without consistently declining inflation.
Still, buyers in need of a home will benefit from the falling rate.
“Serious buyers who need to purchase a home as soon as possible can feel good about pouncing on a home this week, knowing it could cost them upwards of $100 less per month than the same home would’ve cost if they’d signed the deal a week earlier,” Marr said.
“More casual buyers may want to wait a few more months, as there’s reason to be cautiously optimistic that the worst of inflation and high rates are behind us, and monthly payments could come down more.”
The Federal Reserve’s aggressive effort to fight persistent inflation through a series of jumbo interest rate hikes has seriously impacted the housing market. Since the Fed issued its first interest rate increase in March, mortgage rates have shot up from 4.16 percent.
These rising rates, when combined with consistently high prices, have pushed many Americans out of the housing market — especially first-time buyers.
The Fed’s actions have also impacted builders, leading to falling builder confidence and sharp decline in new home construction.
Housing starts declined by 4.2 percent from September to 1.43 million units, according to Census Bureau data released on Thursday.
Meanwhile, data released Wednesday by the National Association of Home Builders (NAHB) revealed that home builders’ confidence in the market for newly constructed single-family homes is at an all-time low.
“Higher interest rates have significantly weakened demand for new homes as buyer traffic is becoming increasingly scarce,” NAHB Chairman Jerry Konter said in a media release.
But the NAHB/Wells Fargo Housing Market Index found that homebuilders are looking for ways to encourage more buyers to enter the market, with 37 percent saying they have cut prices. Overall, 59 percent of homebuilders said they are using some sort of incentive.