A tug of war between inflation and economic growth pulled mortgage rates below 5% for the first time since April.
"The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, especially as the Federal Reserve attempts to navigate the current economic environment," said Sam Khater, Freddie Mac’s chief economist.
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The National Association of Realtors said rates may have topped out.
"The peak in mortgage rates may have already occurred," NAR chief economist Lawrence Yun told FOX Business. "That’s because oil and gasoline prices have been falling of late and hence will lessen broader inflationary pressures. Lower inflation means less aggressive interest rates by the Federal Reserve."
According to Freddie Mac:
- The rate on the benchmark 30-year mortgage fell for a second straight week, averaging 4.99%, down 0.8% from 5.30% last week. A year ago, the rate stood at 2.77%.
- The 15-year rate fell to 4.26%, a decline of 0.6%. Last year, the 15-year fixed rate mortgage averaged 2.10%.
- The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.25%, down from 4.29%. A year ago, at this time, the 5-year ARM averaged 2.40%.
"Mortgage rates could soon turn upward but are unlikely to retouch the 6% mark. Any dip should be viewed as a second-chance opportunity."
"Any mortgage rate decline is a relief for potential homebuyers," Yun added. "Though still higher than a year ago, the current rate of under 5% means around a 12% reduction in monthly payments compared to when mortgage rates peaked at 6% just two months ago.
"Mortgage rates could soon turn upward but are unlikely to retouch the 6% mark. Any dip should be viewed as a second-chance opportunity,"
The drop comes as the latest data on jobless claims show applications for first-time claims for the week ended July 30 rose to 260,000, up 6,000 from the previous week’s revised level.
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The Department of Labor said the shelter component of the consumer price index rose 5.6% in June with rents up 5.8% and the homeowners’ equivalent rent of residences up 5.5%. The shelter index increase was the largest 12-month increase since February 1991.