Editor’s note: Freddie Mac, which has tracked average weekly mortgage rates since 1971 and makes periodic changes to the Basic Mortgage Market Survey, changed its data source as of November 17, 2022. Rather than a survey of lenders, the weekly results will be based on applications received by Lenders that are introduced to Freddie Mac. Find out more about Change Freddie Mac over here.
Mortgage rates fell sharply last week after a series of economic reports indicated that inflation may finally ease.
17, down from 7.08% in the previous week, according to Freddie Mac, the biggest weekly decline since 1981. A year ago, the 30-year fixed rate was flat. at 3.10%.
Mortgage rates have been rising for most of 2022, spurred by the Federal Reserve’s unprecedented campaign to raise interest rates in order to tame spiraling inflation.
In the past week, two major inflation reports have been released – Consumer price index And the producer price index – It showed that prices rose at a slower pace than expected in October, indicating that inflation is slowly moving in the right direction, and may have peaked.
“While the decline in mortgage rates is welcome news, the housing market still has a long way to go,” said Sam Khater, chief economist at Freddie Mac. “Inflation remains high, the Fed is likely to keep interest rates high and consumers will continue to feel the impact.”
The average mortgage rate is based on the mortgage applications Freddie Mac receives from thousands of lenders across the country. The survey only includes borrowers who have given a 20% decrease and have excellent credit. But many buyers who offer less money up front or have less than perfect credit will pay more than the average price.
George Ratiu, director of economic research at Realtor.com, said investors saw lower-than-expected consumer price index data last week as an indication that the Fed may raise interest rates less in the coming months.
While the Fed does not directly set the interest rates that mortgage borrowers pay, its actions do affect them. Mortgage rates tend to track the yield on the 10-year US Treasury note. As investors see or expect interest rates to rise, they make moves that send higher returns and higher mortgage rates.
“The 10-year Treasuries fell from 4.15% last Wednesday to 3.68%, as capital markets seem to be cheering on the slowdown in inflation as a sign that the Fed’s monetary tightening is having the intended effect,” Ratiu said.
Although the inflation data is moving in the right direction, the Fed said it does not expect to back down from raising interest rates until inflation approaches its target of 2%.
However, Ratiu said the decline in mortgage rates over the past week has brought a little relief to buyers.
According to Realtor.com, a buyer who bought a median-priced home with a 20% down payment with an average price last week of 7.08% was facing a monthly payment of about $2,280. At 6.61%, the same buyer will see his payment drop to $2,174. While the savings of $100 per month may not seem like much, over the course of a 30-year loan, the buyer will save approximately $48,000 in interest.
Those savings have motivated some homebuyers to sweep in and install a lower mortgage rate.
Mortgage applications increased for the first time in seven weeks, according to the Mortgage Bankers Association, as purchase and refinance orders increased.
Bob Proxmiet said: “Signs of slowing inflation have pushed mortgage rates below 7% for the first time since mid-October, but with rates still relatively high and affordability low, the average loan amount is now at its lowest level since Almost two years.” . President and CEO of MBA.
Buying a home continues to be a challenge for many homebuyers. Mortgage rates are expected to remain volatile for the rest of the year. And prices remain high in many areas, especially where there is a very limited inventory of homes available for sale.
Meanwhile, inflation and rising interest rates mean that many potential buyers also face tight budgets.
“For consumers, the rapid rise in prices has added significant financial pressures, especially as inflation erodes any wage gains,” Ratiu said. “The Fed’s interest rate hikes are directly related to higher interest rates for credit cards and auto loans, which, along with rising mortgage debt, add additional burdens to household finances.”
More than 20% of listings have seen a price drop as sellers adjust their strategy to meet buyers in a changing financial landscape, according to Realtor.com.
“On the one hand, sellers have been accepting the fact that the housing market priced homes we saw when rates were at 3% leave very few buyers able to manage mortgage payments at today’s rates,” Ratiu said. On the other hand, buyers may be reluctant to proceed with transactions if they find the erratic nature of current mortgage rates worrisome.
The volatility in mortgage rates is not expected to abate in the near future, causing uncertainty for both buyers and sellers.
“With inflation still around 7% and the Fed committed to continuing to raise the funds rate over the next few months, the mortgage market is not out of the woods,” Ratiu said. “We may still see interest rates rise again above 7% before the end of the year.”
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