Mortgage rates level off after rising for 7 weeks
After steadily climbing this fall, average rates — which have been hovering near 8% — inched down this week, but continued fluctuations are likely.
Key points:
- The 30-year fixed rate averaged 7.76% this week, down slightly from last week’s 7.79%.
- Mortgage rates are expected to teeter between 7-8% for the remainder of the year, with some relief likely in the latter half of 2024.
- Mortgage applications continue to decline, sitting at 1995 levels.
Mortgage interest rates leveled off this week, though signs point to a bumpy road ahead as 2023 winds down.
The 30-year fixed-rate mortgage averaged 7.76% this week, down slightly from last week's 7.79%. The 15-year fixed-rate mortgage remained unchanged at 7.03%.
The Federal Reserve's decision on Nov. 1 to leave short-term interest rates unchanged — while signaling it has no plans to cut rates anytime soon — suggests they believe the current benchmark rate is sufficient to bring inflation down to the 2% target, but it will take time.
"Prospective homebuyers (and sellers) should expect mortgage rates to remain close to 8% in November, before coming down slightly by the end of the year," said Lisa Sturtevant, chief economist at Bright MLS. "No one should expect a dramatic drop in rates next year. It is a new era where the average rate on a 30-year fixed rate mortgage will remain around 7% through early next year before declining to 6% by the end of 2024."
Mortgage News Daily has seen a downward trend following the Fed's decision to hold off on rate hikes in November. Rates fell to 7.51% on Nov. 2, the lowest level in more than a month.
While economists don't foresee a significant decrease in rates anytime soon, fluctuations between 7-8% are expected. Upcoming economic reports, particularly the employment and wage data scheduled to be released on Nov. 3, could push rates up in the near term.
"This week's employment and wage growth data release will likely prompt investors to recalculate their inflation forecasts, causing large swings in mortgage rates," said Orphe Divounguy, an economist for Zillow Home Loans.
One other immediate issue is treasury rates, which could increase as the U.S. government grapples with long-term debt and higher interest rates. Higher yields may be needed to attract bond buyers — and rising yields tend to lead to higher mortgage rates.
Mortgage applications declined 2.1% compared to a week earlier and are bouncing around at 1995 levels, according to the Mortgage Bankers Association.
While overall applications are down, adjustable rate mortgages — which offer slightly lower rates — are becoming more popular and now represent 10.7% of all applications, said Joel Kan, MBA's deputy chief economist.