After months of record highs, mortgage rates are showing signs of easing, sending some relief to potential homebuyers’ budgets.
The decline in mortgage rates from when they peaked in the fall is saving new homebuyers almost $300 a month on their monthly payments, according to an analysis from RedFin.
Looking at mortgage rates for the week ending Dec. 23, RedFin found that the monthly payment on the typical home in the U.S. was about $2,254, with a mortgage rate of 6.27%.
It’s $267 less than what it was when mortgage rates peaked in October at about 7%.
“Quite a few buyers have come out of the woodwork in the last few weeks as rates have fallen. Many people who were outbid on multiple homes during the buying boom want to seize this moment because they can take their time touring homes and negotiate on price and terms with sellers,” said RedFin agent Shoshana Godwin.
Homebuyers have struggled with record-high mortgage rates that have cut into how much they are able to afford on a home. The average mortgage payment is still about 35% higher than it was a year ago, and homebuyers lost about $140,000 in terms of buying power when rates hit about 6%.
As mortgage rates ease and buyers become more accustomed to the rates, signs indicate that buyers could be coming back to the market.
According to RedFin, mortgage purchase applications were up 4.6% compared to last month and Homebuyer Demand Index, a way to track tour requests, jumped about 6.5%.
Currently, rates are around 6.34%, according to latest survey from the Mortgage Bankers Association.
“However, if mortgage rates continue to trend down, as we are forecasting, more buyers are likely to return to the market later in the year, as affordability improves with both lower rates and slower home-price growth,” noted Mike Fratantoni, MBA’s chief economist, and senior vice president of research and industry technology.