The interest rate for 15-year and 30-year mortgage terms continue to edge down, leading an expert to warn that bidding wars may be on the horizon.
On Monday, mortgage rates for 30-year fixed terms dropped to 6.72%. Mortgage rates also fell to 6.36% for 20-year fixed terms and 6.02% for 15-year fixed terms, according to Business Insider.
The drop in mortgage rates comes after they soared past 8% in October of this year, largely due to the Federal Reserve hiking its benchmark rate in an effort to tame inflation. With mortgage rates now pulling back, an expert warned that it could lead to bidding wars among homebuyers.
"If rates fall below 7%, I think we're going have a surprisingly strong year," Daryl Fairweather, chief economist at Redfin, told Yahoo Finance Live. "That's when I think we're going to see more people out there with bidding wars."
Homebuyers Are Already Coming Back
In the week ending Nov. 24, mortgage applications for a home purchase increased 5% from the previous week. During the same week, the median monthly mortgage payment fell more than $100 as rates also dipped.
As of October, more than a third of all prospective homebuyers said they are also unwilling to wait for home prices to fall to purchase a home, per Bank of America's Homebuyers Insight Report.
The survey also found that 54% of homeowners are willing to move if they find a more affordable area, even if it means paying a higher mortgage rate. Additionally, about 62% of respondents said they would wait for borrowing costs to fall before buying a house, down from 85% half a year earlier.
"We are beginning to see that lack of patience play out in the survey, which ultimately should lead to activity going forward," Matt Vernon, head of consumer lending at Bank of America, told Reuters.
Despite the increasing interest among homebuyers, purchase activity remains 20% lower than one year ago due to a low supply of existing homes on the market, Yahoo Finance reported, citing data from the Mortgage Bankers Association (MBA).
