Home News Mortgage rates just took the biggest plunge since 1981 — but analysts say the market is ‘not out of the woods yet’

Mortgage rates just took the biggest plunge since 1981 — but analysts say the market is ‘not out of the woods yet’

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Mortgage rates hit their biggest plunge since 1981, but analysts say the market is “still out of the woods”

Mortgage rates tumbled with their biggest weekly drop in 40 years after new data suggested inflation may be starting to cool.

Consumer prices rose 7.7% in October, a slower pace than economists expected. And average interest rates on 30-year fixed mortgages fell below 7% just after last week’s announcement.

“Some buyers may want to wait to see if rates drop further.” To tell George Latiou, Economic Research Manager at Realtor.com, said:

“But with inflation still above 7% and the Fed pledging to keep raising interest rates over the next few months, the mortgage market isn’t out of the woods. “There’s still a chance interest rates will bounce back above 7%.”

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30 year fixed rate mortgage

The average 30-year fixed rate mortgage is now at 6.61%, a far cry from last week’s 7.08%. Freddie Mac reported Thursday.

At this point last year, the 30-year rate averaged 3.10%.

“Mortgage rates fell this week as data came in suggesting inflation may have peaked,” said Sam Cater, chief economist at Freddie Mac.

“Lower mortgage rates are welcome news, but the housing market still has a long way to go. will continue to feel its impact.”

Mortgage interest rates used to be over 7%. The Fed raised key rates by 0.75 points — and more rate hikes are expected, which will hit mortgage rates even more.

(Freddie Mac also notes that it has changed its weekly mortgage reporting method. The housing giant now uses data from mortgage applications instead of surveying lenders, and has a five-year floating rate There are no plans to publish the latest information on mortgages.)

15 year fixed rate mortgage

of 15 year fixed rate mortgage It is also down from last week’s average of 6.38%. Currently he is 5.98%.

A year ago, the average interest rate on a 15-year fixed mortgage was 2.39%.

Despite lower interest rates from last week, many homebuyers have yet to be priced out of the housing market. Note Nadia Evangelou, senior economist at the National Association of Realtors, said:

“At 7%, 1 in 8 renters can afford to buy the median home. I could afford to buy a median-priced home when I was young,” says Evangelou.

“So about 7.9 million renters can no longer afford a typical home, while the percentage of first-time homebuyers hit a record low.”

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Homebuilder sentiment hits 10-year low

Builder confidence in new single-family homes fell for the 11th straight month in November, according to the National Association of Home Builders (NAHB).

Outside of spring 2020, early in the pandemic, it fell five points to 33, its lowest since 2012.

“Rising interest rates have significantly weakened demand for new homes as buyer traffic has become increasingly scarce.” To tell NAHB Chairman Jerry Conter.

“With the housing sector in recession, the Biden administration and new Congress must shift focus to policies that bring down construction costs and allow domestic home builders to ramp up home production.”

Weak demand has forced builders to look for ways to attract buyers to the market, such as cutting prices or paying points to buy down mortgage rates.

Mortgage applications increase as interest rates fall

Mortgage applications increased 2.7% from last week, according to the Mortgage Bankers Association (MBA).

“Adjusted for the Veterans Day holiday, application activity increased in response to lower interest rates due to a 4% increase in home purchase applications. Purchase applications increased across all loan types. and the average loan purchased fell to its lowest level since January 2021.” To tell MBA Vice President and Deputy Chief Economist Joel Kan said:

However, refinancing activity remains low, down another 2% from the previous week and down 88% from the same week a year ago.

“With interest rates much higher than last year, there is little incentive to refinance,” says Kan.

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This article is for information only and should not be construed as advice. It is provided without warranty of any kind.

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