Earlier this year, as interest rates edged ever higher, most of us in the real estate business bid a fond farewell to sub-6% fixed rates, thinking it unlikely we’d see rates that low again (or at least in the near to mid term.) Just a few months ago, the rate on a fixed 30 year conforming mortgage was running about 6.5% and most indicators had it pushing to 7% by year end.
Well, that was then and this is now. Interest rates have been steadily dropping for the last six weeks, and a few lenders are quoting sub-6% rates on conforming, fixed 30 year mortgages with 1 point, and just above 6% with no points. Chalk it up to competition and supply and demand. With the slowdown in real estate markets, there is more money chasing fewer borrowers, and that is having a moderating effect on mortgage rates. (There is more to it than that; the ‘wholesale’ cost of money, which is affected by much more than just real estate markets, has also been dropping.)
While mortgage rates are only one component of demand, the psychological impact of sub-6% rates could give a positive boost to demand.