Mortgage Rates Take a Breather But Remain Over 7%

While still lingering around the 20-year-high level, the 30-year fixed-rate mortgage (FRM) averaged 7.18%, down just a bit from the previous week’s 7.23%, according to the latest Primary Mortgage Market Survey® (PMMS®) released by Freddie Mac on Thursday, August 31.

This week’s numbers:

30-year fixed-rate mortgage averaged 7.18% as of August 31, 2023, down from the previous week when it averaged 7.23%. A year ago at this time, the 30-year FRM averaged 5.66%.
15-year fixed-rate mortgage averaged 6.55%, unchanged from the previous week. A year ago at this time, the 15-year FRM averaged 4.98%.

What the experts are saying:
“Mortgage rates leveled off this week but remain elevated. Despite continued high rates, low inventory is keeping house prices steady,” said Sam Khater, Freddie Mac’s chief economist. “Recent volatility makes it difficult to forecast where rates will go next, but we should have a better gauge in September as the Federal Reserve determines their next steps regarding interest rate hikes.”

Realtor.com Economist Jiayi Xu, commented:

“The Freddie Mac fixed rate for a 30-year mortgage dropped 0.05 percentage points to 7.18% this week, but remained elevated around its 20-year high. Meanwhile, July’s core Personal Consumption Expenditure (PCE) Price Index, a crucial indicator monitored by the Federal Reserve for monetary policy decisions, jumped slightly from year-ago levels but grew at a mild monthly rate which is more in line with the Fed’s 2% inflation target. While July’s job openings provided new evidence that the labor market is cooling, we still need more robust data points to confidently assert that inflation is moving in the desired direction. Despite mortgage rates hitting 20-year highs, we still expect them to reverse course and trend lower as we gather more solid evidence of inflation improvements in the coming months.

“The challenging combination of a 20-year high mortgage rate and constrained housing inventory is creating an unfavorable environment for today’s homebuyers, according to the Realtor.com August Housing Trends report. With many existing homeowners feeling locked-in and opting to stay on the sidelines, home shoppers are seeing fewer existing homes for sale, leading to heightened competition for limited housing options. While many buyers hold back their purchasing plans, Realtor.com’s 2023 Hottest Zip Codes report suggests that some buyers have adjusted to the higher-rate environment and are moving forward with their home search in higher-priced major metros, likely driven by return-to-office demands. However, it is a much more challenging case for first-time homebuyers to make such adjustments as they do not have near-record high home equity to leverage. Fortunately, new homes remain an option for many, as builders are continuing to add homes with a somewhat greater focus on affordable price points,” Xu concluded.