Average mortgage rate falls to 7.18%, ending streak of increases

Potential homebuyers on Long Island finally got a bit of relief this week as the average long-term mortgage rate moved lower for the first time since mid-July after five straight weeks of increases.

The average 30-year fixed rate was 7.18% for the week ending Thursday, according to mortgage giant Freddie Mac. The average reached its highest level since June 2001 last week at 7.23%.

“Mortgage rates leveled off this week but remain elevated,” Sam Khater, chief economist at Freddie Mac, said in a statement. “Despite continued high rates, low inventory is keeping house prices steady. Recent volatility makes it difficult to forecast where rates will go next, but it might be easier to gauge as the Federal Reserve determines their next steps regarding interest rate hikes in September.”

The Federal Reserve’s Federal Open Market Committee is set to meet next on Sept. 19-20 when it will decide whether to adjust its benchmark interest rate. The rate affects how much it costs consumers to borrow money for mortgages, auto loans, credit cards and other types of debt.

Long Islanders looking to buy homes stand to pay hundreds of dollars more each month in housing payments than they would have a year ago when the average rate was 5.66%.

"It's been a challenge," said Christopher Roberti, a Rockville Centre resident and director of strategic growth at Hartford Funding, a Woodbury-based lender. "Over the past couple of months interest rates have kept going up."

In early 2022, borrowers were able to secure rates of around 3%. The steep rise has given some borrowers sticker shock, Roberti said.

He advises clients who are concerned with recent volatility to lock in their rate if it gives them a monthly payment they feel comfortable with. "If they say, 'I don't want to play the market,' … I always encourage a customer to lock in at that time," he said.

Meanwhile, home prices have changed little over the past year. The median home price in Nassau County in July was a record $725,000 and Suffolk County matched its median price record from a year ago at $575,000, according to the latest data from OneKey MLS.

Prices have remained high because demand for homes has exceeded the number of homes for sale. Homeowners who plan to list their homes and move elsewhere must also face accepting a higher mortgage rate to finance their next purchase.

Roberti said he hopes a future drop in rates will encourage more Long Islanders to put their homes on the market. 

"If we see rates come back down to earth, it will be a justification for people to say, ‘Rates are more manageable, let’s sell,'" he said. 

About 61% of outstanding U.S. mortgage holders have loans with a rate of 4% or less, according to Freddie Mac.

Homebuyers interested in where rates are headed should pay close attention to inflation data, said Molly Boesel, principal economist at CoreLogic, which publishes property data and analytics. Specifically, she said to watch core inflation, which measures changes in the costs of goods and services but excludes the volatile food and energy sectors.

Consumer prices increased by 3.2% during the 12 months ending in July, according to the U.S. Bureau of Labor Statistics. But core inflation increased by 4.7% during that time. The next inflation report will be released Sept. 13. The Fed's target for core inflation is 2%.

“Buyers want to look at inflation. It’s really what’s keeping rates up,” Boesel said. “When core inflation gets closer to 2%, or looks like it’s heading in that direction, that’s when they can start to see that rates might decline.”

Boesel said she expects rates to turn downward in mid-to-late 2024 as the pace of inflation slows.

By Jonathan LaMantia

jonathan.lamantia@newsday.com@jonlamantia

Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.