Mortgage rates this week fell below 7% for the first time since mid-August. That won’t unlock the housing market but further declines could be coming.
The average 30-year fixed mortgage rate this week was 6.95%,
Freddie Mac
said Thursday. The Federal Reserve’s decision to keep interest rates steady and its forecasts sent the yield on benchmark
10-year Treasury notes
to 3.949% on Thursday morning, according to Dow Jones Market Data. It was the lowest yield since late July. Mortgage rates often move in tandem with 10-year Treasuries.
The Freddie Mac survey collects data through Wednesday the day prior to its release—meaning the impact of Treasury yields’ slump wasn’t captured in Thursday’s weekly data. Rates measured by Mortgage News Daily moved even lower on Thursday, to 6.62%.
“Potential home buyers received welcome news this week,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Given inflation continues to decelerate and the Federal Reserve Board’s current expectations that they will lower the federal funds target rate next year, we likely will see a gradual thawing of the housing market in the new year.”
Lower rates are an encouraging sign for prospective buyers, particularly first-timers. And rates remain too high to make a financial difference for the majority of homeowners with ultralow mortgage rates. The median first-lien mortgage holder at the end of October had a roughly 3.63% rate, according to ICE Mortgage Technology data. Of all mortgage holders, about 96% had rates below roughly 6.9%, the data show.
Still, recent weeks’ lower rates have made a difference for some buyers and homeowners, leading data suggest.
Redfin’s
index measuring requests for tours and other services rose 3% from last month.
Further savings could come in the near-term, says Andy Walden, vice president of enterprise research at ICE Mortgage Technology. “With the bond market responding favorably to recent economic news and the latest Fed dot plots, we could see additional buyer interest should rates ease further in coming weeks,” he said in an email. “But, with some potential buyers already checked out for the holidays, purchase market demand in the 2024 homebuying season will ultimately be dictated by where 30 year rates are sitting early next year.”
Many housing economists expect mortgage rates to fall in 2024. The National Association of Realtors estimates the 30-year fixed rate mortgage to average 6.3% in 2024 as the Fed cuts rates. The Mortgage Bankers Association’s forecast calls for 6.1% rates by the end of next year. Realtor.com predicts rates will average 6.8% next year, and fall to 6.5% by the end of the year.
The Mortgage Bankers Associations’ index tracking applications for home purchase loans has in recent weeks lifted off of multidecade lows in recent weeks, while its measure of refinance applications surged for two weeks in a row. Refinance applications jumped about 19% last week, the largest seasonally-adjusted weekly increase since January.
Refinance volume has picked up, says Mike Fratantoni, the Mortgage Bankers Association’s chief economist, but from very low levels. “We’ve now got a year or so of mortgage borrowers who have gotten rates the sevens—or higher in many cases,” Fratantoni said. With some lenders quoting rates below 7%, “that’s going to attract some attention, just to get some savings.”
Write to Shaina Mishkin at [email protected]
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