Mortgage rates fell slightly this week as a modest rate hike by the Federal Reserve signaled a promising improvement in inflation.
30-year fixed-rate mortgages fell an average of 6.09% in the week ending 2-Feb. Freddie Mac data released on Thursday showed it was up from 6.13% the previous week. A year ago the 30-year fixed interest rate was 3.55% for him.
After rising for much of 2022, spurred by the Fed’s tough rate hikes to curb surging inflation, mortgage rates have trended downward since November, with inflation peaking Data continue to show that it is possible.
Mortgage rates haven’t been this low since September, and are now almost 1 percentage point below their last peak of 7.08% in early November last year.
“This 1 percentage point cut in interest rates will leave 3 million more mortgage-ready consumers, pushing the median home price above $400,000,” said Sam Cater, chief economist at Freddie Mac. Loans will be available.
The Federal Reserve Board 1/4 interest rate Smallest Wednesday hike since March. The move to slow the pace of gains is a clear sign that central banks are making progress in fighting inflation.
The Fed doesn’t directly set the interest rates borrowers pay on mortgages, but its actions influence borrowers. Mortgage rates tend to track 10-year Treasury yields that fluctuate based on a combination of expectations of Fed action, actual Fed action, and investor reaction. As bond yields rise, mortgage rates also rise. When interest rates fall, mortgage rates tend to follow suit.
Realtor.com economic research manager George Ratiu said that as inflationary pressures ease, mortgage originators are following suit, lowering borrowing costs.
The effects of Federal Reserve action have kept mortgage rates at the lower end in the short term, he said, adding that he expected rates to remain at around 6% in the coming weeks. .
“While the Federal Reserve controls short-term interest rates, long-term interest rates, including the 30-year mortgage rate, have been dictated by market expectations of where the economy will go,” said Mike Fratantoni, senior vice president and chief economist at Mortgage. It’s a function,” he said. banking association. “And investors are betting that the economic slowdown and the Fed’s eventual victory over inflation will lead to lower interest rates over time.”
The MBA expects mortgage rates to fall slightly to near 5% through 2023.
Other economic data influence the movement of mortgage rates, such as reports on employment and inflation.
“The latest indicators still point to the economy’s resilience,” said Ratiu. The labor market remains tight despite the Federal Reserve’s (Fed) efforts to cool the economy: Wednesday’s Jobs and Turnover Survey (JOLTS) There were 11 million job openings in December, Highest since July.
Housing economists and mortgage market players will look to the next report on inflation, due out on February 14th, to see if the pace of price gains continues to slow.
Mortgage applications last week were down 9% from the previous week, according to the MBA, despite lower interest rates in recent weeks.
“Overall application activity declined last week despite lower interest rates,” said Joel Kang, MBA’s vice president and deputy chief economist, at a time when housing activity remains volatile. “As the spring homebuying season begins, we expect higher buying activity, supported by lower interest rates and slower home price growth. It helps restore purchasing power.”
In the housing market, low interest rates have eased the financial burden on homebuyers, Latiou said.
Housing market data for January showed more homes for sale, properties staying on the market longer, and prices dropping 11% from their 2022 peak, according to Realtor.com.
“For buyers of median homes today, down payment amounts are lower than they were last summer,” says Ratiu. “While this is positive news, affordability remains a major challenge, especially for first-time buyers.”
Average mortgage interest rates are based on mortgage applications received by Freddie Mac from thousands of lenders nationwide. This study includes only borrowers with a 20% down payment and good credit. Many buyers with low upfront payments or less than ideal credit end up paying more than the average rate.