The 30-year fixed-rate mortgage (FRM) averaged 6.57% this week, up from 6.39% last week, to where it returned after a brief and only slight dip earlier in May. This is according to the latest Primary Mortgage Market Survey (PMMS) from Freddie Mac released Thursday.
This week’s numbers:
- 30-year fixed-rate mortgage averaged 6.57% as of May 25, 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 5.97%, up from last week when it averaged 5.75%. A year ago at this time, the 15-year FRM averaged 4.31%.
What the experts think:
“The U.S. economy is showing continued resilience which, combined with debt ceiling concerns, led to higher mortgage rates this week,” said Sam Khater, Freddie Mac’s chief economist. “Dampened affordability remains an issue for interested homebuyers and homeowners seem unwilling to lose their low rate and put their home on the market. If this predicament continues to limit supply, it could open up an opportunity for builders to help address the country’s housing shortage.”
Realtor.com economist, Jiayi Xu, commented:
“The Freddie Mac fixed rate for a 30-year mortgage ticked up 0.18 percentage points to 6.57% this week, mirroring the trend of 10-year treasury yields, as investors closely track ongoing debt ceiling negotiations and evaluate the prospective direction of Federal Reserve interest rate policy. Although the probability of a default remains low, even the fears and panic related to a potential government default could cause creditors to ask for higher interest rates from the U.S. Treasury, resulting in a significant increase in various borrowing costs, including mortgages. Resolving the debt impasse sooner rather than later would mitigate potential adverse effects on the housing market, which is already contending with high prices and elevated mortgage rates.
“An additional area of focus revolves around the release of the Federal Reserve’s minutes from its May meeting. Although investors anticipate a pause at the upcoming meeting after ten consecutive rate hikes, the minutes revealed a sense of uncertainty regarding the future direction of monetary policy. Generally, officials concurred on the importance of closely monitoring incoming economic data and maintaining flexibility leading up to the next policy meeting.
“High prices and elevated mortgage rates have prompted buyers to seek more affordable options. Although the national housing market is experiencing a slow spring, there is growing competition in relatively affordable markets, particularly in the Northeast and Midwest regions. As more and more buyers flock to relatively affordable places, it further reduces the opportunities available for first-time home buyers. While a dip in down payments might relieve a little pressure, it remains a challenging task for first-time buyers who don’t have existing home equity to tap into, as the dollar amount of down payments continues to be significantly larger than pre-pandemic levels. A recent survey conducted by Avail, a Realtor.com® company, revealed that a decreasing share of renters considered buying a home, with insufficient savings for a down payment ranking as would-be buyers’ primary concern.”