The average long-term mortgage rate in the US dropped to its lowest point since May, marking the ninth consecutive week of decline.
The average 30-year mortgage rate fell to 6.61% from 6.67% last week, according to Freddie Mac. The rate was 6.42% one year ago.
Borrowing costs for 15-year fixed-rate mortgages, popular among homeowners refinancing, fell slightly to 5.93% from 5.95% last week, according to Freddie Mac. This is up from 5.68% one year ago.
Freddie Mac’s chief economist, Sam Khater, believes the economy is in good shape heading into the new year. The growth is solid, the labor market is tight, inflation is decelerating, and the housing market is rebounding.
Mortgage rates have decreased since late October, when the average rate on a 30-year home loan reached 7.79%. This was the highest level since late 2000.
The decrease In loan rates has followed the pattern of the 10-year Treasury yield, which lenders use as a benchmark for setting loan prices. The yield experienced a surge in mid-October, reaching its highest level since 2007. However, it has since declined as there is a belief that inflation has decreased enough for the Federal Reserve to cut interest rates. This contrasts with their previous actions of dramatically raising the rates since March of 2022.
The Federal Reserve has chosen to keep interest rates steady at its last three meetings, contributing to a rise in financial market activity.
Investors’ expectations for future inflation, global demand for U.S. Treasuries, and the Fed’s benchmark federal funds rate can impact home loan rates.
The steep rise in mortgage rates that started in early 2022 has increased borrowing costs on home loans. This has reduced the amount of money potential homebuyers can afford, even though the prices of homes have continued to rise due to a persistently low supply of properties available for sale. Consequently, sales of previously owned homes in the U.S. have decreased by 19.3% in the first 11 months of 2023.
Although there has been a recent drop in mortgage rates, the average rate on a 30-year home loan is still significantly higher than just two years ago when it was at 3.11%. This large difference between the current rates and those of two years ago contributes to the low inventory of homes for sale, as homeowners who lock in low rates are discouraged from selling. Housing economists predict that home sales will rise next year as mortgage rates are expected to ease further.
