Mortgage interest rates fell for the second week in a row this week, continuing a reversal of what had been a distinct upward trend, according to data from Freddie Mac.
Rates for a 30-year fixed mortgage fell to an average of 3.04% from 3.13% the week before. The 3.18% seen two weeks ago was the highest for the year so far, and more than half a percentage point above the record low 2.65% reached in January.
The recent rise in rates has contributed to a decrease in mortgage application activity—especially for refinancing—as higher borrowing costs deter consumers. Last year and over the winter, low rates made home loans more affordable and were among the factors that propelled the housing market to new heights amid the economic downturn caused by the pandemic.
But don’t expect the downward trend to continue for very long. Inflationary pressures—which are closely linked to mortgage rates via U.S. Treasury bills—have been increasing lately, and rates are expected to trend upward over the year, said Sam Khater, Freddie Mac’s chief economist, in a statement.
“The economy is improving on the demand side and on the supply side, a variety of goods and materials remain scarce,” he said. “As a result of this imbalance, pricing pressures are building and causing inflation to rise. Despite the pause in mortgage rates recently, we expect them to increase modestly for the remainder of this year.”