Mortgage Rates Fall Once Again, But Rising Home Prices Means Buyers Shouldn’t Expect Savings

Mortgage rates are still near all-time lows, but that doesn’t make owning a home cheaper for home buyers.

The 30-year fixed rate mortgage averaged 2.91% for the week ending August 27, down eight basis points from the previous week, Freddie Mac FMCC,
+ 0.69%
reported Thursday.

The 15-year fixed-rate mortgage also fell eight basis points to an average of 2.46%. The 5-year Treasury-indexed variable rate hybrid loan remained on average at 2.91%.

Low mortgage rates have provided incentives for would-be buyers, pushing home sales to hit volumes last seen before the Great Recession. But today’s homebuyers aren’t necessarily striking a deal over last year’s cohort of homebuyers.

See also:Fannie Mae, Freddie Mac to delay controversial refinancing fee

Over this period last year, the 30-year fixed-rate mortgage averaged 3.58%. But someone who buys the typical listing today will pay a $ 14 more monthly mortgage than someone who bought a property last summer, according to data from Realtor.com.

“Lower mortgage rates can’t completely offset the higher costs,” said Danielle Hale, chief economist at Realtor.com.

(Realtor.com is operated by News Corp NWSA,
+ 0.06%
subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.)

When rates drop, accessibility improves over a period of time. But as history has shown, low rates eventually get more people to enter the real estate market. This creates competition for homes, which drives up prices.

Read more:The Big Move: I’m tired of renting in Manhattan, but I love living in New York. Is it now time to buy if the city is supposedly dead?

Currently, according to Realtor.com, average listing prices are 10.3% higher than they were a year ago. Meanwhile, the low supply of homes for sale meant that the properties were out of the market in record time. This increases the likelihood of a particular buyer facing a bidding war, which can increase how much he has to spend to get the keys to his dream home.

Ultimately, today’s homebuyers may find that low mortgage rates are a double-edged sword.

However, good news for buyers: While rates remain incredibly low, refinancing is becoming less attractive to existing homeowners, Hale said. “This paradoxically can help buyers as they won’t have to compete with the largest number of refinance applicants for the lender’s attention,” he said.

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