Drop In 30-Year Fixed-Rate Mortgage Could Encourage Home Buyers

Laura Kusisto reported this week at The Wall Street Journal Online that, “Mortgage rates dropped below 4% for the first time since November, providing more kindling to an already hot housing market as the crucial spring selling season gets under way.

“The average rate on a 30-year fixed-rate mortgage dropped to 3.97% for the week ended April 20, from 4.08% a week earlier and 4.3% in mid-March, according to data released Thursday by mortgage company Freddie Mac.

“The drop could help encourage buyers who had been put off by rising mortgage rates to dive into the market and prompt others to rush to buy homes before rates rise again.”

Graph from The Wall Street Journal.

The Journal article noted that, “After the November election, optimism that the U.S. economy would get a boost from Republican plans for a tax overhaul, increased infrastructure spending and reduced regulations helped drive interest rates sharply higher as investors bet on faster growth.

But the tide is turning. Treasury yields, which move in the opposite direction of prices, approached a five-month low last week as many investors worried that turmoil in Syria and North Korea, as well as election uncertainty in France and the lack of progress on tax and spending policy under President Donald Trump, would lead to slower economic growth in the months ahead.”

Ms.┬áKusisto added that, “The impact of a decline in mortgage rates of about a third of a percentage point would be relatively small in many areas of the U.S. The monthly mortgage payment for a home at the median price of $236,400, assuming a down payment of 20%, would be about $40 less today than a month ago.

The effect would be much more pronounced, however, in high-cost markets, such as California.”

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