Does it matter that the mortgage rate fell 0.08%? – Marketplace

According to Freddie Mac, the average interest rate on a 30-year mortgage fell 0.08% to 6.95% this week. That might not seem like a big deal, but it brings the average mortgage rate below 7% for the first time since August.

Could this make people who have always wanted to enter the housing market more likely to take the plunge?

When the leftmost digit of a number changes, there is research that shows we tend to give the change more weight.

“If you move from 7.25 to 7, the decline seems to be a little smaller than, say, from 7 to 6.75,” said Simon Blanchard, who studies financial decisions as a professor at Georgetown.

Therefore, the change in the mortgage rate from 7.03% last week to 6.95% this week is particularly noticeable.

It could also result in hundreds of dollars in savings for those who buy now as opposed to a month ago.

Redfin chief economist Daryl Fairweather says this could encourage hesitant first-time buyers to return.

“Especially people who feel like, ‘Oh, I’m just so close to almost being able to afford a home,’” she said.

In Raleigh, North Carolina, real estate agent Sheryl Merritt says she hasn’t seen any impact from the drop in interest rates on her business yet.

She says part of her job is educating buyers about what’s realistic. And those 2 and 3 percent mortgage rates we saw a few years ago? She says it was an anomaly.

“We will probably never see that again. If you look at the last 50 years, interest rates have averaged around 6, 6 to 7%,” she said.

Still, Merritt said affordability is a big issue given current prices. “Even if interest rates go down, that doesn’t give everyone the opportunity,” she said.

And those buyers who can afford to start looking could wait to see if mortgage rates fall further.

Economist Daryl Fairweather compares it to bargain hunting.

“For example, do you want to buy your winter coat during the winter sales? What’s like a good sale? Or do you wait until summer when the sale takes place? And the winter coat is now out of fashion,” she said.

“Over the last year or so, people have gotten used to playing this waiting game when it comes to mortgage rates,” points out Georgetown resident Simon Blanchard.

Now, he says, they might be willing to wait a little longer.

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