The 30-year fixed-rate mortgage (FRM) inched up to 6.43% this week, a slight increase from 6.39% the previous week, according to the latest Primary Mortgage Market Survey® (PMMS®) from Freddie Mac released Thursday.
This week’s numbers
- 30-year fixed-rate mortgage averaged 6.43% as of April 27, 2023, up from last week when it averaged 6.39%. A year ago at this time, the 30-year FRM averaged 5.10%.
- 15-year fixed-rate mortgage averaged 5.71%, down from last week when it averaged 5.76%. A year ago at this time, the 15-year FRM averaged 4.40%.
What the experts are saying:
“The 30-year fixed-rate mortgage increased modestly for the second straight week, but with the rate of inflation decelerating rates should gently decline over the course of 2023,” said Sam Khater, Freddie Mac’s chief economist. “Incoming data suggest the housing market has stabilized from a sales and house price perspective. The prospect of lower mortgage rates for the remainder of the year should be welcome news to borrowers who are looking to purchase a home.”
Realtor.com economist, Jiayi Xu commented:
“The Freddie Mac fixed rate for a 30-yr mortgage increased for a second week in a row to 6.43% this week. As we enter the typically busy spring season, affordability remains the primary concern in the housing market. Starting May 1st, the Federal Housing Finance Agency will enact changes to fees known as loan-level price adjustments (LLPAs) to tackle housing affordability challenges in the U.S. and bolster the capital at Freddie Mac and Fannie Mae.
“LLPAs are fees based on factors such as a borrower’s credit score and the size of their down payment that are charged by Fannie Mae and Freddie Mac at the time of loan origination. While it is technically an upfront fee, most lenders convert it into the interest rate on the mortgage, so borrowers pay it over time.
“Unlike the FHA’s recent action that promotes homeownership by reducing insurance premiums to benefit FHA borrowers, who are more likely to be first-time buyers and buyers of color, the new LLPAs subsidize low credit score borrowers by charging more to those with high scores. While it still costs more to have a lower credit score, the effective penalty for scores under 680 is now smaller than it was. To offset this, borrowers with scores ranging from 680 to above 780 will likely have to pay slightly more than they did under the previous system, raising concerns about the impact on middle-class home buyers.
“The new policy is designed to open the door of homeownership to many first-time home buyers with lower credit scores and low to moderate down payments. For example, if a first-time home buyer has a credit score of 659 and a down payment of 20%, then the buyer will pay a fee equal to 2.25% of the loan balance under the new structure, instead of the 3.0% of the loan balance they would have paid under the previous policy. On a hypothetical $400k loan, that’s a savings of $3,000 in closing costs.
“However, the new policy could exacerbate the challenges faced by well-qualified buyers, many of whom are repeat buyers. As these home buyers typically have better credit scores, the revised LLPAs are likely to compound their worries along with facing higher mortgage rates. In addition, since lots of repeat buyers are also sellers, this could further complicate their selling decisions and lead to fewer new listings in the housing market. For example, under the revised LLPAs pricing system, a home buyer with a credit score of 739 and a down payment of 20% will face a surcharge of 1.25%, which represents an increase of 0.5%age points compared to the previous rate of only 0.75%. This equates to an additional $2,000 in closing expenses for a $400k loan.”
