Mortgage rates fell for a second straight week, with the average 30-year fixed rate declining to 7.24%.
The pullback offers modest savings, but borrowing costs remain more than a percentage point above a year ago.
Mortgage applications increased, although homebuying and refinancing activity continued to trail last year.
Mortgage rates moved lower again this week, giving prospective homebuyers a small break as October comes to an end.
The average rate on a 30-year fixed-rate mortgage fell to 7.24% from 7.32% the previous week, according to Freddie Mac’s October 29 report. The average 15-year fixed rate also declined, slipping to 6.60% from 6.68%.
The decline marked the second consecutive weekly improvement. The 30-year rate has now fallen 0.16 percentage points from the 7.40% recorded earlier this month, reaching October’s lowest level.
Freddie Mac Chief Economist Sam Khater said the decline modestly improved purchasing power for prospective buyers.
Much higher rates year-over-year
Even so, buyers face substantially higher borrowing costs than they did last fall. A year ago, the average 30-year rate was 6.17%, while the 15-year rate averaged 5.41%. Freddie Mac’s survey focuses on conventional home purchase loans for borrowers with excellent credit and a 20% down payment; individual offers will vary.
For someone borrowing $400,000 over 30 years, this week’s average rate translates into a monthly principal-and-interest payment of approximately $2,726. That is about $22 less than at last week’s rate and $44 less than at the early-October rate.
Compared with the same loan at last year’s 6.17% rate, however, the monthly payment would be about $284 higher. Those calculations exclude property taxes, homeowners insurance, and any mortgage insurance.
Mortgage applications edged up
The latest application figures suggest some borrowers responded to easing rates. The Mortgage Bankers Association (MBA) reported that total mortgage applications increased 3.4% on a seasonally adjusted basis during the week ending October 23. Purchase applications rose 4%, while refinance applications increased 3%.
The weekly gains came against a weak comparison with last year. Purchase applications remained 18% below their year-earlier level, and refinancing applications were down 61%.
MBA Deputy Chief Economist Joel Kan said elevated rates have caused many buyers to postpone purchases, while homeowners with existing low-rate loans have little incentive to refinance. Adjustable-rate mortgages accounted for 11.3% of applications, the highest share in more than a year, as some borrowers sought lower initial payments.
For buyers, the recent decline improves the numbers slightly. But with the average 30-year rate still above 7%, the cost of financing a home remains a significant obstacle.