Mortgage rates ease again, giving buyers a small amount of relief

Home prices still make affordability difficult

• Mortgage rates dropped for a second week in a row, with the average 30-year fixed rate sliding to 7.24%.

• The decline provides only limited savings, and borrowing costs are still more than a percentage point above the level of a year ago.

• Mortgage applications rose, though homebuying and refinancing activity continued to lag behind last year.

Mortgage rates edged down again, giving potential homebuyers a little breathing room as the month draws to a close.

The average rate on a 30-year fixed mortgage decreased to 7.24% from 7.32% the prior week, according to Freddie Mac. The average 15-year fixed rate also dipped, falling to 6.60% from 6.68%.

That marked a second straight weekly improvement. The 30-year rate has now dropped 0.16 percentage points from the 7.40% level seen earlier in the month, reaching its lowest point for the period.

Freddie Mac Chief Economist Sam Khater said the move gave prospective buyers a modest boost in purchasing power.

Rates remain sharply above last year

Even with the recent decline, borrowers are still facing much steeper costs than they were a year earlier. At that time, the average 30-year rate stood at 6.17%, while the 15-year average was 5.41%. Freddie Mac’s survey tracks conventional home purchase loans for borrowers with excellent credit and a 20% down payment, so individual offers may differ.

For a borrower taking out a $400,000 mortgage over 30 years, this week’s average rate would mean a monthly principal-and-interest payment of about $2,726. That is roughly $22 less than at last week’s rate and $44 below the payment tied to the earlier rate.

Compared with the same loan at last year’s 6.17% rate, though, the monthly payment would be about $284 higher. These figures do not include property taxes, homeowners insurance or mortgage insurance.

Applications rise slightly

Recent application data suggests some borrowers took advantage of the small drop in rates. The Mortgage Bankers Association said total mortgage applications rose 3.4% on a seasonally adjusted basis during the latest reported week. Purchase applications increased 4%, and refinance applications climbed 3%.

Those weekly gains came against weak year-ago comparisons. Purchase applications were still 18% lower than a year earlier, while refinancing activity was down 61%.

MBA Deputy Chief Economist Joel Kan said elevated rates have pushed many buyers to delay purchases, and homeowners with existing low-rate mortgages have had little reason to refinance. Adjustable-rate mortgages made up 11.3% of applications, the highest share in more than a year, as some borrowers looked for lower initial payments.

For buyers, the latest decline helps a bit. Still, with the average 30-year rate remaining above 7%, financing a home continues to be a major hurdle.