Homebuyers are getting a break from escalating mortgage rates, a pause that may at least temporarily support a housing market that is showing signs of cooling down, according to data released Thursday.
The average rate for the popular 30-year fixed-rate mortgage has climbed about 1 percentage point since early May, recently hitting the highest level in two years, making monthly loan payments more expensive and cutting some plans to buy a home.
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But that rate dropped in the latest week, following the Federal Reserve’s decision not to start tapering its assets purchases that have kept long-term rates low. For the week that ended Sept. 26, the 30-year-mortgage rate averaged 4.32 percent, the lowest rate since late July, down from 4.5 percent in the prior week. The average 15-year rate decreased to 3.37 percent from 3.54 percent,
“These low rates should somewhat offset the house price gains seen the last number of months and keep housing affordability elevated,” said Frank Nothaft, chief economist for Freddie Mac.
The drop comes as there are signals that higher rates are taking a toll on the housing market. A gauge from the Mortgage Bankers Association shows that loan applications to purchase a home have dropped about 9 percent since early May. Data released Thursday showed that pending sales of homes — this is a forward-looking indicator for housing because sales typically close within two months — fell in August for a third straight month, thanks to higher interest rates and home prices, among other factors, according to the National Association of Realtors.
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