Mortgage rates reversed course this week, ticking up to 6.71%, Freddie Mac reports. But fluctuations in borrowing costs may have less of an impact on home buyers’ psyche than you think. Indeed, they matter “less today than they have historically,” Jessica Lautz, deputy chief economist for the National Association of REALTORS®, told CNBC.
Though mortgage rates have hovered in the 6% range for more than six months, pressing on buyers’ budgets, about a quarter of real estate transactions in May were all-cash sales, Lautz noted in the CNBC interview. Additionally, many homeowners are able to leverage equity from their current home to offset today’s rate increases. Homeowners who’ve been in their home for a decade have an average of $200,000 in equity, Lautz said.
Mortgage demand also has been growing—applications for home purchase loans rose by 3% last week, according to the Mortgage Bankers Association, despite higher rates. Applications have increased for three consecutive weeks and are at their highest levels since early May. “New-home sales have been driving purchase activity in recent months as buyers look for options beyond the existing-home market,” says Joel Kan, the MBA’s vice president and deputy chief economist.
The National Association of Home Builders reports that lower price points in the new-home market—properties in the $200,000 to $300,000 range—are seeing the biggest growth in sales. In May 2022, just 5,000 homes were sold in that price range; last month, about 12,000 sales occurred, says NAHB Chair Alicia Huey. The greater number of new homes available at lower price points may be helping buyers offset higher borrowing costs.
Freddie Mac reports the following national averages with mortgage rates for the week ending June 29:
- 30-year fixed-rate mortgages: averaged 6.71%, rising from last week’s 6.67% average. A year ago, 30-year rates averaged 5.7%.
- 15-year fixed-rate mortgages: averaged 6.06%, increasing from last week’s 6.03% average. Last year at this time, 15-year rates averaged 4.83%.