The average rate on 30-year fixed mortgages reached its lowest point since January 2018, coming down last week to 4.06% according to newly-released data from Freddie Mac. The rate declined approximately a quarter point from a week earlier, representing the largest drop in over ten years.
And right on cue, lenders have started advertising mortgage rates lower than 4% – including TD Bank, HSBC Holdings plc, and Teachers Federal Credit Union, according to Bankrate.com.
“People love it when they have a rate like that,” said Michael Menatian, president of Sanborn Mortgage in West Hartford. “Psychologically, it has a huge impact.”
Average rates almost hit 5% just a few months ago, exhausting refinancing and hindering home price growth. While the housing market remains cool, economist and lenders are optimistic that lower mortgage rates will lead to a rebound as the spring selling season starts.
An article from the Wall Street Journal said that lenders who were hard hit last year would benefit from a renewed spike in the mortgage market. According to the article, nonbank firms originated nearly half of all mortgages.
Mortgage rates have been falling along with the yield on the benchmark 10-year Treasury note. The Federal Reserve’s decision to pause increases to interest rates triggered the decline, giving prospective buyers the opportunity to enter the market. In fact, the Mortgage Bankers Association’s latest survey revealed that mortgage applications rose 8.9% as rates fall.
“It’s such a big move in rates, it’s prompting more potential home buyers to step back into the market,” said Joel Kan, associate vice president of economic and industry forecasting at MBA.