In its latest Primary Mortgage Market Survey, Freddie Mac revealed that the 30-year fixed-rate mortgage averaged 6.61 per cent, down from last week when it averaged 7.08 percent.
The 15-year fixed-rate mortgage averaged 5.98 per cent, down from last week when it averaged 6.38 percent.
“Mortgage rates tumbled this week due to incoming data that suggests inflation may have peaked,” said Sam Khater, Freddie Mac’s chief economist.
However, he tempered the good news with a hearty dose of reality.
He said: “While the decline in mortgage rates is welcome news, there is still a long road ahead for the housing market. Inflation remains elevated, the Federal Reserve is likely to keep interest rates high and consumers will continue to feel the impact.”
A separate survey from the Mortgage Banker’s Association (MBA) also found that rates were falling. In its figures, the MBA noted that the 30-year fixed rate saw the largest single-week decline since July 2022, dropping to 6.9 per cent.
“Mortgage rates decreased last week as signs of slower inflation pushed Treasury yields lower,” said Joel Kan, MBA’s vice president and deputy chief economist.
He also noted that application activity was on the rise.
He said: “Application activity increased in response to the drop in rates – driven by a four per cent rise in home purchase applications. Purchase applications increased for all loan types, and the average purchase loan dipped to its smallest amount since January 2021.”
David Robinson, co-founder at Wildcat Law, explained that the key to the reduction was the latest US inflation figures.
He said: “Rates have started to fall back due to better than expected inflation figures leading to speculation that the Fed will not need to raise rates as aggressively as once thought.
“This has also fuelled the market with some hesitant buyers thinking that they may not get a better chance to buy or move to a larger home.”
Will the UK follow the US?
As the saying goes ‘when America sneezes, the UK catches a cold’, and Mortgage Solutions asked experts if the UK was ‘getting the sniffles’ (in a mortgage sense).
Many agreed that rates were heading south, as they are in the US.
Ashley Thomas, director at Magni Finance said: “Generally, the markets follow the US as they are closely linked. We have already seen mortgage rates reduce, I expect this to continue with the swap rates dropping.”
Other agreed but felt that it would take some time for the UK to catch up.
Mike Staton, director at Staton Mortgages said: “The UK mortgage market normally follows the US very closely, however, I think we are about a year behind the US as they dealt with the recession head on and dramatically increased rates to a 40-year high.”
Riz Malik, director at R3 Mortgages, agrees that the US’s tough take on inflation has advanced their market.
He said: “The US and UK mortgage markets are very similar. The aggressive stance that was taken with inflation and interest rates would suggest that they are six to 12 months ahead of the UK. Their concurrent 0.75 per cent increases could mean US inflation has already peaked.”
Matthew Jackson, director at Mint FS, agrees that the US is ahead of the curve but feels that the Bank of England (BoE) should have the desired effect of bringing rates down.
He said: “The US is ahead of the curve on this, and hopefully we are now seeing our mortgage rates level off and as the actions of the BoE take effect on inflation and the markets we will see this start to push fixed rate prices downwards.”
