Mortgage rates ‘teetering’ after the sudden collapse of Silicon Valley Bank and an expert says borrowers can take advantage of the current volatility – here’s how much you could save on your home loan

Mortgage rates ‘teetering’ after the sudden collapse of Silicon Valley Bank and an expert says borrowers can take advantage of the current volatility – here’s how much you could save on your home loan

After five weeks of upward momentum, mortgage rates fell unexpectedly this week, which could draw potential buyers back to the market.

Do not miss it

“Last week was a whirlwind of economic indicators and contingencies that sent mortgage rates soaring,” writes Hannah Jones, economic research analyst at

Despite the Fed suggesting earlier last week that the federal funds rate could see bigger increases to cool inflation, the recent crises in the banking sector sent investors into a spiral.

“The failure and ensuing bailout of Silicon Valley Bank raised investor concerns about additional bank closures, driving activity toward government bonds, resulting in falling 10-year Treasury yields and a reduction in mortgage rates.” says Jones.

30 year fixed rate mortgages

The average 30-year fixed rate fell to 6.60% this week, compared to last week’s average of 6.73%. A year ago, around this time, America’s most popular home loan averaged 4.16%.

While this drop has made buying homes more affordable for many Americans, National Association of Realtors (NAR) senior economist Nadia Evangelou believes interest rates could fall even further depending on the financial market and the Fed’s next meeting. week.

“At the current rate, many can afford to buy a mid-price home since they need less than 25% of their gross income for a monthly mortgage payment,” she says.

“If rates fall further to 6%, buyers can buy the median priced home by cutting 14%, which was the median buyer down payment in 2022.”

15-year fixed-rate mortgage interest rate trend

The average 15-year fixed interest rate also fell slightly this week from 5.95% to 5.90%. This time a year ago, the 15-year fixed rate averaged just 3.39%.

“The turbulence in financial markets is putting significant downward pressure on interest rates, which should benefit borrowers in the near term,” said Sam Khater, chief economist at housing giant Freddie Mac.

He encourages buyers to take advantage of the volatility and shop around for additional rate quotes before taking out a mortgage.

“Our research concludes that homebuyers could potentially save $600 to $1,200 a year by taking the time to shop from multiple lenders.”

Read more: Biden’s one-size-fits-all plan to protect tenants comes ‘at the expense’ of landlords – what to do if you still want to slice a piece of the real estate pie

Luxury home purchases are taking a record drop

Wealthy homebuyers have also experienced sticker shock in the market. U.S. luxury home sales fell 44.6% year-on-year to the second-lowest level ever recorded during the three months ended Jan. 31, real estate brokerage Redfin reports.

The median sale price is also up 9% since the same period last year to $1.09 million, close to its all-time peak of $1.1 million in spring 2022. However, according to Redfin, there may still be a be silver lining for potential buyers. economic research leader Chen Zhao.

Zhao points out that competition is limited and that jumbo loans often have lower mortgage rates compared to other types of loans because there is less risk that higher-end buyers will default on their mortgages.

Wealthy house hunters are also often offered additional rate discounts from their banks as a perk for storing substantial funds there.

Zhao recommends that buyers shop around for the best mortgage rates possible and ask their preferred lender to match the lowest quote.

The demand for mortgages continues to grow

Thanks to lower rates, demand for mortgages is up 6.5% from last week, according to the Mortgage Bankers Association (MBA).

“Home purchase applications increased for the second week in a row, but remained nearly 40% below the pace of last year,” said Joel Kan, vice president and deputy chief economist at the MBA.

“While lower rates should stimulate demand for homes, volatility in the financial market may cause buyers to pause in their decisions.”

The fall in rates also encouraged some borrowers to refinance their home loans, as refinancing activity increased by 5%, though it is still 74% lower than the same week a year ago.

What to read next

This article provides information only and should not be taken as advice. It comes without any kind of warranty.

Leave a Comment