Mortgage rates fell again this week, falling for the fourth week in a row.
The 30-year fixed-rate mortgage averaged 6.33% in the week ending December 8, down from 6.49% the previous week, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.10%.
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 mortgage rates have fallen over the past two weeks, following reports that inflation may finally have peaked.
The rate cuts come amid concerns about lackluster economic growth, said Sam Khater, chief economist at Freddie Mac.
“Over the past four weeks, mortgage rates have fallen by three-quarters of a point, the biggest drop since 2008,” Khater said. “While the rate cut has been significant, homebuyer sentiment remains weak with no major positive reaction from buying demand to these lower rates.”
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 a 20% down payment 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.
Rates fell again this week as investors watched for more signs of slowing inflation, said Danielle Hale, chief economist at Realtor.com.
“Next week’s Consumer Price Index data will confirm whether these trends are pervasive across the variety of goods and services consumers buy,” she said.
Markets are also awaiting news from the Fed, which is expected to announce another rate hike at its meeting next week. Analysts predict the rate hike could be a small jump of half a point, rather than the three-quarter point hikes the central bank has rolled out four times in a row this year.
Mortgage rates tend to follow the yield of 10-year US Treasury bills. When this rate increases, the 30-year fixed rate mortgage also increases. When the Treasury rate drops, mortgage rates also drop.
The Fed has signaled that it intends to continue raising rates – even if only in small increments – until inflation shows clear signs of falling.
“This means mortgage rates could continue on the volatile path seen so far in 2022,” Hale said.
Due to the higher costs of financing a home and the volatility of rates, many potential buyers have left the market.
Mortgage applications slowed last week even as the rate on a 30-year fixed mortgage fell again, said Bob Broeksmit, president and CEO of the Mortgage Bankers Association. The average loan size for a purchase request last week was at its lowest level in nearly two years, another indication that home prices are cooling.
“Despite the continued decline in mortgage rates that began in October, potential buyers continue to delay their buying decisions, even as home prices flatten or fall,” Broeksmit said.
Rates have seen outsized moves this year, mostly up, and weekly swings in mortgage rates have been larger than historical averages, underscoring overall volatility.
“This made home buying budgeting incredibly difficult for homebuyers who saw their buying power rise and fall as rates fluctuated,” Hale said.
The recent drop below the 7% rates we saw a month ago has lowered the average monthly cost of buying a home by nearly $170, Hale said. But today’s buyer of a median-priced home, putting down a 10% down payment, is looking at a monthly payment of $2,340 for principal and interest, an increase of about $900 per month per year. compared to last year, according to Realtor.com.
“As housing costs continue to be a major challenge for buyers and renters, mid-size affordable housing markets offer a potential haven that workers with flexible arrangements can continue to seek,” Hale said. . Homebuyers were looking for affordability in cities like Hartford, Connecticut; El Paso, TX; or Louisville, Kentucky, according to Realtor.com.
“We expect the major housing markets of 2023 to remain relatively active, although the number of home sales nationwide is expected to decline,” she said.
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