Borrowing costs have dropped for the fifth-straight week and are expected to go lower through the end of the year.
Source: Realtor Magazine
By: Melissa Dittmann Tracey - Dec 1, 2023
Falling mortgage rates are bringing holiday cheer to home buyers. The 30-year fixed-rate mortgage, which has been backing away from its near-8% high in October, dropped to 7.22% this week, marking the fifth consecutive week of declines, Freddie Mac reports.
“Market sentiment has significantly shifted over the last month, leading to a continued decline in mortgage rates,” says Sam Khater, Freddie Mac’s chief economist. “The current trajectory of rates is an encouraging development for potential home buyers, with purchase application activity recently rising to the same level as mid-September, when rates were similar to today’s levels. The modest uptick in demand over the last month signals that there will likely be more competition in a market that remains starved for inventory.”
Housing activity is sensitive to any fluctuation in mortgage rates: In October, as borrowing costs soared to a 20-year high, pending home sales plummeted to their lowest level on record, the National Association of REALTORS® reported this week. But since rates have fallen in recent weeks, more home buyers appear to be coming back to the market. The latest report from the Mortgage Bankers Association shows mortgage purchase applications—a gauge for future homebuying activity—rose 5% last week.
“It seems clear mortgage interest rates hit a peak in late October and are now headed south,” says Jessica Lautz, NAR’s deputy chief economist. The latest drop in rates compared to the Oct. 26 peak of 7.79% translates into a monthly savings of $125 on a $400,000 home, Lautz says. That “is significant for many home buyers who may be able to use the savings to cover a monthly utility bill or commuting costs,” she says.
The drop in mortgage rates may encourage more first-time home buyers to enter the market, and they may have more success getting ahead of competing buyers despite low housing inventory, Lautz says. “First-time buyers may have more success with a multiple-offer situation without the intense competition of spring and early summer—especially now, since housing inventory remains tight and even lower mortgage interest rates are expected this spring.”
Freddie Mac reports the following national averages with mortgage rates for the week ending Nov. 30:
30-year fixed-rate mortgages: averaged 7.22%, dropping from last week’s 7.29% average. A year ago, 30-year rates averaged 6.49%.
15-year fixed-rate mortgages: averaged 6.56%, also falling from last week’s 6.67% average. Last year at this time, 15-year rates averaged 5.76%.