Mortgage Rates Just Made Their Largest Weekly Drop in Years. This Expert Believes It’s a Short-Lived Window of Opportunity

A photo to accompany a story about recent mortgage rates STEFANI REYNOLDS/AFP via Getty Images
A real estate sign is posted in front of a house for sale in Washington, DC, on February 26, 2022. Even though mortgage rates took, what experts believe to be, a temporary dip this week, overall higher rates have helped quiet the housing market some.
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Homebuyers could be catching a rare break as mortgage rates saw their biggest drop in years this week, although one expert says it will likely be short-lived.

The average interest rate for a 30-year fixed rate mortgage was 5.27% this week, according to a survey by Bankrate, which like NextAdvisor is owned by Red Ventures. That’s a drop of 18 basis points from last week and a decent decline from a peak of 5.46% two weeks ago. Rates have risen about two percentage points since the start of the year.

A similar survey by Freddie Mac, a government-sponsored entity that buys mortgages on the secondary market, fell 15 basis points to 5.1%. It’s the biggest weekly drop in that survey since April 2020.

Don’t expect rates to plummet right back into the 3s, says Nicole Rueth, producing branch manager with the Rueth Team of Fairway Independent Mortgage Corp. 

“I don’t think that this is a trend change,” she says. “I think that this is an opportunity, that buyers need to know it exists.”

Pro Tip

While the drop in mortgage rates might offer a bit of relief from the rapid rise we’ve seen so far, don’t worry too much about trying to time the market.

It may be a sign of mortgage markets stabilizing after a difficult few months. Since the start of the year, markets have had to deal with pressure from a lot of different directions: COVID-19, high inflation, the Federal Reserve’s response to that inflation, and Russia’s invasion of Ukraine. With the Federal Reserve settling into a rhythm with its efforts to raise rates and sell off assets, that makes markets feel the future is a bit more predictable, Rueth says.

“The market doesn’t like fear,” Rueth says of the volatility in rates this year. “The market doesn’t like the unknown.”

The Fed is expected to continue to raise its benchmark short-term interest rate and take other steps that will probably lead to higher mortgage rates, Rueth says. While she says rates of 7% or 8% might not be likely, they could easily return to the 5.5% or 6% range. “We will see somewhat of an upward pressure on interest rates,” she says. “I don’t know that they have that much higher to go.”

What This Drop In Mortgage Rates Means For Homebuyers

The dip means there’s an opportunity for buyers who feel strained by the rising cost of purchasing a home – between prices for homes and the increasingly expensive financing – created by the current rate environment and housing market.

It’s a confluence of a few factors all offering a little relief at the same time. Higher mortgage rates have cut demand for homes. Pending home sales dropped 3.9% from March to April, according to data from the National Association of Realtors, which NAR attributed to shrinking demand due to affordability. 

Walk through the door when it opens,” Rueth says. “We were just gifted a door that we didn’t see coming with more inventory and less demand and a dip in rates.

In a moment like this, stay in touch with your lender about how your rate is changing and consider locking your mortgage rate if you get one you like.

The moment might not last, she says, and you shouldn’t try to time the market to get the best deal. If, as expected, mortgage rates rise again, that could complicate your homebuying journey, but it might still be the right time to buy a house based on your personal financial situation. “Keep pushing through even if it closes,” Rueth says.