Editor’s Note: Freddie Mac, which has tracked average weekly mortgage rates since 1971 and has regularly updated its Primary Mortgage Market Research, changed its data source as of November 17, 2022. Received by a lender submitted to Freddie Mac.find out more about Changes in Freddie Mac here.
Mortgage rates fell sharply last week after a series of economic reports suggesting inflation may finally ease.
The average rate on 30-year fixed-rate mortgages for the week ending November 17 was 6.61%, down from 7.08% the week before, according to Freddie Mac. This is his biggest weekly drop since 1981. 3.10%.
Mortgage rates have been on the rise for most of 2022 as the Federal Reserve’s (Fed’s) unprecedented rate-hiking campaign was meant to curb skyrocketing inflation.
There were two important inflation reports last week. consumer price index When producer price index – Prices rose at a slower pace than expected in October, suggesting inflation is nudging in the right direction and perhaps peaking.
“Lower mortgage rates are welcome news, but the housing market still has a long way to go,” said Sam Cater, chief economist at Freddie Mac. It will likely keep interest rates high and consumers will continue to feel the impact.”
Average mortgage interest rates are based on mortgage applications received by Freddie Mac from thousands of lenders nationwide. The study includes only borrowers with a 20% down payment and good credit. However, many buyers with low upfront payments or poor credit will pay more than the average rate.
George Ratiu, manager of economic research at Realtor.com, said investors saw last week’s weaker-than-expected CPI data as an indication that the Fed could make smaller rate hikes in the coming months. said he assumed there was.
The Federal Reserve does not directly set the rate borrowers pay on mortgages, but its actions affect them. is in When investors see or anticipate rate hikes, yields move higher and mortgage rates move higher.
“10-year Treasurys fell last Wednesday as capital markets appeared to welcome a slowdown in inflation in a sign that Fed tightening is having its intended effect. It dropped from 4.15% to 3.68%,” Latiou said.
Inflation data are moving in the right direction, but the Fed has said it won’t stop raising rates until inflation approaches its desired target of 2%.
Still, lower mortgage rates over the past week have given buyers some relief, Ratiu said.
According to Realtor.com, buyers of mid-priced homes with a 20% down payment at an average interest rate of 7.08% last week faced monthly payments of about $2,280. At a rate of 6.61%, the same buyer’s payment he reduced to $2,174. Saving him $100 a month may not seem like much, but over the course of the 30-year loan, the buyer saves her nearly $48,000 in interest.
These savings have prompted some homebuyers to wipe out and lock in lower mortgage rates.
Mortgage applications rose for the first time in seven weeks, with both purchase and refinancing applications, according to the Mortgage Bankers Association.
“Signs of slowing inflation have pushed home loan rates below 7% for the first time since mid-October, but rates remain relatively high and affordability has declined accordingly, so the average Lending is at its lowest level in almost two years.” , President and CEO of MBA.
Acquiring a home remains a challenge for many homebuyers. Mortgage rates are expected to remain volatile through the end of the year. And in many areas, especially those with very limited inventory of homes available for sale, prices remain high.
Meanwhile, rising inflation and interest rates mean many would-be buyers are also facing tight budgets.
“For consumers, the rapid rise in prices is putting enormous financial pressure on them, especially as inflation undermines wage growth,” Ratiu said. “The Fed rate hikes are directly related to higher credit card and auto loan rates, which, along with the rise in mortgages, puts an additional strain on household budgets.”
According to Realtor.com, more than 20% of listings have seen price cuts as sellers adjust their strategies to accommodate buyers in changing financial conditions.
“Sellers, on the other hand, were swayed by the fact that homes priced for the housing market we experienced when interest rates were 3% have few buyers who can manage mortgage payments at today’s rates. I agree,” said Ratiu. “Buyers, on the other hand, may be hesitant to proceed with the deal if they are puzzled by the volatile nature of current mortgage rates.”
Mortgage rate volatility is not expected to abate in the near future, creating uncertainty for both buyers and sellers.
“With inflation still above 7% and the Fed pledging to keep raising interest rates over the next few months, the mortgage market is not in jeopardy,” Latiu said. “There is still a chance interest rates will return to above 7% by the end of the year,” he said.