Mortgage interest rates continue downward trend
The mortgage rate averaged 6.49% this week, according to Freddie Mac. That’s down from over 7% just a few weeks ago.
Key points:
- While falling rates should be good news for potential borrowers, loan applications are down, an indication that homebuyers remain hesitant.
- Affordability continues to be a blocker for many would-be buyers.
- For those who are ready to buy, there is more inventory available compared to a year ago.
In a sign that the Federal Reserve will slow its pace when it comes to rate hikes, the 30-year fixed rate mortgage continued its downward trend this week.
The rate averaged 6.49% this week, down from 6.58% a week ago, according to Freddie Mac's Primary Mortgage Market Survey. In early November the rate averaged over 7%.
The optimism of slowing rate hikes is tempered by other economic realities, said Sam Khater, Freddie Mac's chief economist.
"Even as rates decrease and house prices soften, economic uncertainty continues to limit homebuyer demand as we enter the last month of the year," Khater said.
A year ago, the 30-year fixed-rate mortgage was 3.11%, less than half of today's rate.
The 15-year fixed rate is also steadily declining. This week the average was 5.76%, down from last week's 5.9%. A year ago the rate was 2.39%.
While the mortgage rate decline is good news for potential buyers, it has not translated into increased demand, said Bright MLS Chief Economist Lisa Sturtevant, who noted that mortgage loan application volume was down nearly 1% compared to the previous week.
Sturtevant said affordability continues to be a big constraint on the market. Along with interest rates that have doubled over the past year, home prices have not come down quickly after surging in 2021.
"Many people have been priced out of the market altogether and a half-percentage point drop in the interest rate is not going to make a difference," Sturtevant said.
The drop in interest rates has lowered the monthly median home mortgage payment to $2,150, said George Ratiu, senior economist at Realtor.com. That's down $150 from a few weeks ago, but still much higher than a year ago, when it was in the $1,500 range.
"The silver lining is that the inventory of homes for sale continues ramping up, even with sellers taking a step back from the market this fall," Ratiu said. "Buyers who are ready can expect more properties to choose from and a better negotiating position."