Average mortgage rate increases to 6.39% after 5 straight weeks of decline

The average 30-year fixed mortgage rate rose this week to 6.39%, marking the first increase after five straight declines in the weekly lender survey, mortgage giant Freddie Mac announced on Thursday.

Last week’s average rate was slightly lower, at 6.27%. At this time last year, the average was 5.11%.

At the current average rate, Long Island homebuyers taking out a $500,000 mortgage would need to pay $3,124 a month for the principal and interest portion of their loan, excluding taxes and insurance. That’s about 15% more, or $400 more a month, than the payment at last year’s average rate.

“For the first time in over a month, mortgage rates moved up due to shifting market expectations,” said Sam Khater, Freddie Mac’s chief economist, in a statement. “Home prices have stabilized somewhat, but with supply tight and rates stuck above 6%, affordable housing continues to be a serious issue for potential homebuyers.”

Long Island home prices dipped slightly in March compared with the previous year, but a combination of stronger buyer demand in the spring and a lack of listings has led to multiple offers on homes priced attractively, agents told Newsday. 

The upward move in mortgage rates followed an increase in the 10-year Treasury yield earlier this week. Mortgage rates tend to move in the same direction as the yield on those U.S. government bonds. Yields rise when bond prices fall, which can indicate strong investor sentiment in the U.S. economy as investors believe they can get better returns elsewhere.

 After reaching its highest point since November on March 9 — 6.73% — the average long-term rate fell in five consecutive weeks as there was concern about the effect of the failures of Silicon Valley Bank and Signature Bank on the broader U.S. economy. Thursday’s higher rate reflects “some calming in the banking sector,” wrote Nadia Evangelou, senior economist at the National Association of Realtors, in commentary published online.

Further slowing of inflation would benefit potential homebuyers who hope to see rates fall. The release of the U.S. consumer price index for March showed consumer prices increased 5% compared with a year ago. Mortgage rates tend to rise during inflationary periods as was the case over the past year.

“As long as inflation eases, the overall trend for mortgage rates will continue downward,” Evangelou wrote. “Rates may fall below 6% by year’s end.”

The average rate for a 15-year home loan increased to 5.76% for the week ending Thursday, up from 5.54% during the previous week.

 Zahra Jafri, founder and president of Lynx Mortgage Bank in Westbury, said she’s seen demand for loans improve in recent weeks as the average 30-year rate dropped  closer to 6%. But borrowers are having trouble making  a purchase because the number of houses for sale on Long Island is near historic lows. After several years of mortgage rates hovering around 3%, Jafri said homeowners are reluctant to act, particularly as rates have been fluctuating daily.

“Once we start seeing some stability with rates and inflation get under control, I think we’ll see things start to change,” Jafri said.

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.