Mortgage rates drop from their highest amount in 41 years

Mortgage rates drop from their highest amount in 41 years

Mortgage rates fell nearly half a percent this week, marking the biggest week-over-week decline since November 1981.

The average 30-year fixed mortgage rate fell to 6.61% from 7.08% the previous week, according to Freddie Mac, which this week changed its methodology for calculating rates. The decline follows a sharp decline in the 10-year Treasury yield last week after a government showed inflation had cooled last month.

The sudden drop gave buyers and sellers of price-pressured homes still in the market a hint of relief, boosting activity in an otherwise sluggish market.

“The drop in rates caused buyers to rush in and try to lock in rates this weekend, the difference in demand was significant,” Adriana Perezchica, president of Via Real Estate, told Yahoo Money. “Until recently, buyer demand had weakened as borrowers had difficulty keeping up with rising rates and house prices. We don’t know how long this rate cut will last…and buyers are rushing to set a rate.

This week’s results also showcase Freddie Mac’s revised methodology, which now collects real-time rates based on loan applications submitted to its automated underwriting system. The new approach has an average difference of less than 10 basis points.

Shoppers rush to get lower rates

Buyers took strategic action as rates fell. Demand for mortgages soared last week, with the volume of purchase requests rising 4%, according to the Mortgage Bankers Association’s latest survey of applications.

While Freddie Mac reported that the 30-year average mortgage rose above 7% last Thursday, the same day the government released new inflation data, which came in weaker than expected. That prompted the 10-year Treasury yield – which fixed mortgage rates tend to follow – to plunge more than 32 basis points to 3.816%, below its recent average of 4%.

10-year Treasuries fell even lower this week, falling to 3.716% on Wednesday.

“Mortgage rates moved in line with last week’s collapse of the 10-year Treasury. In fact, it was the biggest daily mortgage rate cut I can remember in over 20 years,” Jeffrey Ruben, president of WSFS Mortgage, told Yahoo Money last week. “The 30-year fixed rate mortgage has gone from just over 7% to 6.5% in a single day.”

Self-guided tour of a home for sale in Sherman Oaks. According to the Mortgage Bankers Association, homebuyer activity increased in the week ending Nov. 11 as potential buyers took advantage of lower rates. (Credit: Lawrence K. Ho, Los Angeles Times via Getty Images)

According to Perezchica, the lower rates boosted the purchasing power of one of his clients, pushing the borrower’s pre-approved mortgage budget from $430,000 to $490,000.

“My client’s mortgage rate went from 8.2% to 6.5% in one day. It’s huge,” Perezchica said. “This means the same buyer will be able to afford a home in an area closer to town and won’t have to settle for a house further away or smaller.”

Still, rising house prices and continued inflationary pressures continue to fuel housing affordability concerns, especially as historically low rates remain fresh in the minds of buyers. Purchase request volume, for example, is still down 46% from a year ago, when rates were 3.10%.

“Buyers may be hesitant to move forward with transactions if they find the erratic nature of current mortgage rates disconcerting,” George Ratiu, head of economic research at, said in a statement. “Some buyers may want to wait and see if rates drop even further. However, with inflation still north of 7%, the mortgage market is not out of the woods.”

Real estate agent Steve Bremis is launching a

Realtor Steve Bremis puts up an “Open House” sign for three condominiums for sale in Somerville, Massachusetts. (Credit: Brian Snyder, REUTERS)

Door-to-door sellers remain cautious

The drop in demand is disappointing for sellers. The share of respondents in a Fannie Mae survey who said now was a good time to sell fell from 59% in September to 51% in October.

Homebuilders are feeling similarly discouraged by the market, with confidence in the industry falling for the 11th consecutive month, according to the National Association of Home Builders.

To encourage buyers in the market, home sellers are slowly adjusting their price expectations.

The share of homes with a price cut was 20.9% in October, down from 10.6% a year ago, according to In November, 37% of builders reduced their prices that month, compared to 26% in September, with an average price reduction of 6%. Builders also offer buying points and buybacks for buyers.

That may not be enough for some budget buyers.

“Higher rates and high home prices have been tough on home sales,” Perezchica said. “Even with this rate cut, some buyers I spoke to expressed uncertainty about a potential recession and their ability to pay a monthly mortgage payment in the near future. They don’t know if it’s the right time to buy.

Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.

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