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Mortgage rates fall for a third week in a row as inflation fears ease




Editor’s note: Freddie Mac, which has tracked weekly average mortgage rates since 1971 and periodically makes changes to its Primary Mortgage Market Survey, changed the source of its data starting November 17, 2022. Instead of surveying lenders, the weekly results will be based on applications received by lenders that are sent to Freddie Mac. Find more about Freddie Mac̵[ads1]7;s change here.



CNN

Mortgage rates fell again this week, marking the third week in a row of falling rates.

The 30-year fixed-rate loan averaged 6.49% in the week ending Dec. 1, down from 6.58% the previous week, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.11%.

Mortgage rates have risen through most of 2022, spurred by the Federal Reserve’s unprecedented campaign to raise interest rates to curb rising inflation. But in the past couple of weeks, mortgage rates have fallen following reports that indicated inflation may have finally peaked.

Fed Chairman Jerome Powell said on Wednesday that the central bank could start pulling back on the pace of its aggressive rate hikes as soon as December.

“Mortgage rates continued to fall this week as optimism grows over the prospect that the Federal Reserve will slow the pace of rate hikes,” said Sam Khater, Freddie Mac’s chief economist.

But even with softer rates and easing rates, Khater said, economic uncertainty is dampening homebuyer demand as we enter the final month of the year.

The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey only includes borrowers who put 20% down and have excellent credit. But many buyers who put down less money up front or have less than perfect credit will pay more than the average price.

Powell’s comments on Wednesday were welcome news for investors.

But he added: “Despite some promising developments, we have a long way to go,” noting that the Fed has “not seen any clear progress” on the decades-high inflation plaguing the economy.

“The Fed indicates that the aggressive rate hikes this year have been enough to start slowing inflation,” said George Ratiu, Realtor.com’s director of economic research.

Mortgage rates tend to follow the yield on 10-year US Treasuries. When investors see or expect interest rate increases, they make moves that generate higher yields and mortgage rates.

Investors are also looking at the Fed’s favorite inflation target, released today, which showed some cooling. Along with yesterday’s news from Powell, US Treasury yields fell, suggesting that mortgage rates are likely to move in the same direction.

“The pullback in mortgage rates from the 7.0% territory provides some relief for homebuyers who saw their budgets shrink dramatically over the past year,” Ratiu said.

After almost a year of rising mortgage rates, the breather in interest rates in recent weeks has been welcome news for homebuyers. They have reacted positively to lower interest rates, with mortgage applications to buy a home last week, according to the Mortgage Association.

The 30-year fixed mortgage rate has fallen nearly 60 basis points in the past five weeks, according to Freddie Mac’s numbers, which has drawn some potential buyers back into the market, said Bob Broeksmit, CMB, president and CEO of the Mortgage Bankers Association

“With signs of economic slowdown both in the US and globally, mortgage rates will remain volatile but will likely continue to trend downward,” he said, noting that the MBA projects mortgage rates will end the year below 7%.

This means that today’s buyers may have relatively lower payments than those buying just a few weeks ago.

At today’s rates, the buyer of a median-priced home is looking at a monthly payment of $2,150 — before taxes and insurance — an improvement from just a few weeks ago when that figure was around $2,300, according to Realtor.com.

“For real estate markets, mortgage interest rates compounded the relentless rise in prices over the past two and a half years, pushing many buyers to the sidelines,” Ratiu said. “The reprieve in the relentless wave is welcome news. However, financial pressures continue to make the path to home ownership an expensive one for many households.”

The outlook for 2023 suggests housing costs will remain high, according to a Realtor.com forecast.

“The silver lining is that the inventory of homes for sale continues to rise, even with sellers taking a step back from the market this fall,” Ratiu said. “Buyers who are ready can expect more properties to choose from, and a better negotiating position.”



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