Editor’s note: Freddie Mac, which has tracked weekly average mortgage rates since 1971 and has periodically made changes to its primary mortgage market survey, changed the source of its data effective November 17, 2022. Instead of surveying lenders, weekly results will be based on applications received from lenders that are submitted to Freddie Mac. Learn more about Freddie Mac’s Change here.
Mortgage rates fell again this week, marking the third consecutive week of rate cuts.
The 30-year fixed rate mortgage 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 for most of 2022, boosted by the Federal Reserve’s unprecedented interest rate hike campaign to rein in soaring inflation. But over the past two weeks, mortgage rates have fallen on reports that inflation may finally have peaked.
Fed Chairman Jerome Powell said Wednesday that the central bank could begin to ease the pace of its aggressive rate hikes as early as December.
“Mortgage rates have continued to fall this week as optimism grows around the prospect that the Federal Reserve will slow its pace of rate hikes,” said Sam Khater, chief economist at Freddie Mac.
But even with rates and prices easing, Khater said, economic uncertainty is dampening demand from homebuyers as we enter the final month of the year.
The average mortgage rate is based on the mortgage applications Freddie Mac receives from thousands of lenders across the country. The survey only includes borrowers who have staked 20% and have excellent credit. But many buyers who put less money up front or have less than perfect credit will pay more than the average rate.
Powell’s remarks on Wednesday were good news for investors.
But he added: “Despite some promising developments, we still have a long way to go,” noting that the Fed has “not seen clear progress” on the decades-long inflation plaguing the US. economy.
“The Fed indicates that this year’s aggressive rate hikes have been sufficient to begin to slow inflation,” said George Ratiu, head of economic research at Realtor.com.
Mortgage rates tend to follow the yield of 10-year US Treasury bills. When investors see or anticipate rate hikes, they take action that drives up yields and mortgage rates.
Investors are also watching the Fed’s favorite inflation gauge, released today, which showed some cooling. Taken together with yesterday’s news from Powell, US Treasury yields fell, suggesting that mortgage rates should head in the same direction.
“The pullback in mortgage rates from the 7.0% territory brings some relief to homebuyers who have seen their budgets shrink significantly over the past year,” Ratiu said.
After nearly a year of rising mortgage rates, the rally in rates over the past few weeks has been good news for homebuyers. They reacted positively to the rate cut as mortgage applications to buy a home increased last week, according to the Mortgage Bankers Association.
The 30-year fixed mortgage rate has fallen nearly 60 basis points in the past five weeks, according to figures from Freddie Mac, which has attracted some potential buyers to the market, said Bob Broeksmit, CMB, president and CEO of the Mortgage Bankers Association.
“With signs of an economic slowdown in the United States and around the world, mortgage rates will remain volatile but are expected to continue to decline,” he said, noting that MBA expects mortgage rates to end the year below 7%.
This means that buyers today can have relatively lower payments than those who bought just a few weeks ago.
At the current rate, 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 rates have compounded the relentless rise in prices over the past two and a half years, pushing many buyers to the sidelines,” Ratiu said. “The respite in the relentless wave is good news. However, financial pressures continue to make the path to home ownership costly for many households.
The outlook for 2023 calls for housing costs to remain high, according to forecasts from Realtor.com.
“The silver lining is that the inventory of homes for sale continues to rise, even with sellers stepping 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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