Mortgage rates fall below 7%, but affordability remains a dream for many: Freddie Mac

Mortgage rates are back down below 7% this week. A 30-year fixed-rate mortgage averaged 6.94%, Freddie Mac reported. Rates for 30-year mortgages averaged 7.02% last week.

Fixed rates for 15-year mortgages also declined, averaging 6.24%. This is down just slightly from last week when 15-year mortgage rates averaged 6.28%. Falling rates and an increasing housing inventory are bright spots in the housing market plagued by unaffordability the last few years.

“Spring homebuyers received an unexpected windfall this week, as mortgage rates fell below the seven percent threshold for the first time in over a month,” said Sam Khater, Freddie Mac’s chief economist. “Although this week’s data on previously owned home sales showed a decline, total inventory of both new and existing homes is up.” 

“Greater supply coupled with the recent downward trend in rates is an encouraging sign for the housing market,” Khater said.

You can ensure you’re getting the lowest mortgage interest you can by comparing lenders and their rates through Credible.

THE 25 BEST CITIES FOR BUYERS ON A BUDGET: ZILLOW

Gen Z and millennials make up a large share of homebuyers

Homebuyers in 2023 largely consisted of Gen Z and millennials. About two in five new mortgages went to buyers under 35, and 26.5% of mortgages to buyers between the ages of 35 to 44, Redfin found in a recent report.

Historically, first-time buyers have made up much of the existing buying market, so it’s not inherently surprising that two of the younger generations comprise much of the market.

“First-time buyers aren’t as spooked by high rates as people who are trying to move up to a bigger or better home,” Antonia Ketabchi, a Redfin Premier agent in Maryland, said. “High costs are still a challenge, but younger people are excited about the fact that they’re looking to buy their first home, and they’re not locked in by a low mortgage rate because until now they’ve been renting.”

“Plus, they weren’t in the market three years ago when mortgage rates were sitting under 3%, so they don’t have an ultra-low point of comparison,” said Ketabchi.

Buyers in the 45- to 54-year-old range made up 16.1% of new mortgages in 2023, while those 55 to 64 made up 10.8%. Older adults buy homes less frequently than other generations, so those aged 65 to 74 made up just 5.4% of new mortgages.

Gen Zers and millennials may be a large percentage of homebuyers, but the two generations still have the lowest rates of homeownership. Younger adults haven’t had as much time to get into the home buying market, plus price is a significant barrier with homes at historical highs. About 26% of Gen Zers owned homes in 2023, and 55% of millennials.

If you think you’re ready to shop around for a home loan, consider using Credible to help you easily compare interest rates from multiple lenders in minutes.

RENTING IS SLIGHTLY CHEAPER THAN BUYING, PUSHING GEN Z TO RENT MORE OFTEN THAN BUY

Home affordability grows more difficult for low-income buyers

Interest rates and housing prices are pushing prospective homebuyers with low incomes out of the buying market. Nearly one in five (20.6%) new mortgages went to families categorized as low income, another Redfin report found.

During the height of the pandemic in 2020, low-income homebuyers accounted for 23.2% of new mortgages, showing a significant decline in buying power within the last few years.

“There was a sweet spot in 2020 when mortgage rates were ultra low and home prices had yet to skyrocket, allowing some lower-income Americans to break into the housing market,” Redfin Senior Economist Elijah de la Campa explained.

“But somewhat ironically, the continued strength of the economy has made it harder to afford a home and widened the real-estate wealth gap between rich and poor Americans. The Fed’s interest-rate hikes, meant to help cool inflation and slow a hot economy, have pushed mortgage rates to near their highest level in more than two decades. That’s on top of home prices, which skyrocketed during the pandemic buying boom and have stayed high due to a shortage of homes for sale,” said Campa.

There are still some areas of the country where low-income earners can afford homes. The Midwest and certain East Coast metros have larger percentages of low-income buyers. At 32.1%, Minneapolis had the largest number of low-income buyers out of the 50 most populated metros, Redfin found. Detroit also had a high percentage at 30.8%.

A site like Credible can let you view multiple mortgage lenders and provide you with personalized rates, all without impacting your credit.

THERE ARE NOW 550 US CITIES WHERE THE TYPICAL HOME VALUE IS $1 MILLION OR MORE

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.