Mortgage interest rates fall to lowest level in over a year

Mortgage rates this week fell to the lowest level in 15 months, an encouraging sign for Bay Area homebuyers eager for relief.

The average rate for a 30-year fixed-rate mortgage dropped to 6.47% as of Thursday, down a quarter of a percentage point from last week, according to Freddie Mac. It was the sharpest weekly decline since December.

“The decline in mortgage rates does increase prospective homebuyers’ purchasing power and should begin to pique their interest in making a move,”  Freddie Mac’s Chief Economist Sam Khater said in a statement.

Mortgage rates have doubled since the Federal Reserve began increasing rates in the spring of 2022 to bring inflation under control. High rates have put off not only buyers, but also sellers, leading inventory to reach some of the lowest levels in years. Few sellers want to give up their low interest rates, and would rather hang onto their properties than sell.

Even just a quarter of a percentage point drop can translate to hundreds of dollars in savings on a monthly mortgage payment. The buyer of a median-priced home in the Bay Area with a 20% down payment would have a monthly mortgage payment of $7,369 had they bought in the beginning of July, versus $7,057 if they were to buy now — a difference of $112,320 over the life of a 30-year mortgage.

The low availability of homes has led to increased competition, pushing the median Bay Area home price up to $1.4 million in June, a 6% increase from the same time last year.