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Mortgage rates fall for third straight week 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 as of November 17, 2022. Instead of surveying lenders, the weekly results will be based on of applications received from lenders that are submitted to Freddie Mac. Find more about Changing Freddie Mac here.



CNN

Mortgage rates fell again this week, marking the third week in a row that rates have fallen.

The 30-year fixed-rate mortgage averaged 6.49% in the week ending Dec. 1, down from 6.58 percent 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, spurred by the Federal Reserve’s unprecedented campaign to raise interest rates to tame rising inflation. But mortgage rates have fallen over the past few weeks following reports that inflation may finally have peaked.

Fed Chairman Jerome Powell said on Wednesday the central bank may begin to pull back on the pace of its aggressive rate hikes back in December.

“Mortgage rates continued to fall this week as optimism grew around the prospect that the Federal Reserve will slow its rate hikes,” said Sam Kater, Freddie Mac’s chief economist.

But even with interest rates softening and prices easing, 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 have put 20% down and have excellent credit. But many buyers who put less money down or have less-than-perfect credit will pay more than the average rate.

Powell’s remarks 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 clear progress” on the decades-high inflation plaguing the economy.

“The Fed is showing that aggressive rate hikes this year have been enough to start slowing inflation,” said George Ratiu, manager of economic research at Realtor.com.

Mortgage rates typically track the yield on the 10-year US Treasury bond. As investors see or expect interest rate hikes, they make moves that send yields higher and mortgage rates higher.

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

“The retreat of mortgage rates from the 7.0% territory brings a degree of relief to homebuyers who have seen their budgets shrink dramatically over the past year,” Ratiu said.

After nearly a year of rising mortgage rates, the slowdown in rates over the past few weeks has been welcome news for homebuyers. They reacted positively to lower interest rates, with applications for home equity loans rising 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 Freddie Mac figures, which has drawn some potential buyers back into the market, said Bob Brookmitt, CMB, president and CEO of the Mortgage Bankers Association

“With signs of an economic slowdown both in the U.S. and globally, mortgage rates will remain volatile, but are likely to continue to decline,” he said, noting that the MBA forecast mortgage rates to end the year below 7%.

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

At today’s rate, the average homebuyer can expect 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 out,” Ratiu said. “The postponement of the relentless jump is welcome news. However, financial pressures continue to make the path to home ownership expensive for many households.”

The 2023 forecast calls for housing costs to remain high, according to a Realtor.com forecast.

“On the positive side, the inventory of homes for sale continues to increase, even as sellers take 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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