Mortgage rates dropped last week for the fifth consecutive week, following a positive inflation report for November and the Federal Reserve’s decision to cut back on interest rate hikes, according to Freddie Mac.
The average rate for a 30-year fixed-rate mortgage dropped to 6.31% for the week ending Dec. 15, according to Freddie Mac’s Primary Mortgage Market Survey. This was a decrease from the previous week when it averaged 6.33%, yet it remains significantly higher than last year when it was 3.12%.
The 15-year mortgage was 5.54% last week, down from 5.67% the week before and up from 2.34% last year.
The steady decline in mortgage rates has helped kickstart mortgage demand, according to Freddie Mac Chief Economist Sam Khater. Mortgage applications increased 3.2% last week from the week prior, according to the Mortgage Bankers Association’s seasonally adjusted index.
“The good news for the housing market is that recent declines in rates have led to a stabilization in purchase demand,” Khater said. “The bad news is that demand remains very weak in the face of affordability hurdles that are still quite high.”
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The Fed last week announced a 50 basis points interest rate increase, stepping down from the more aggressive 75 basis points increases of the previous four meetings.
However, Federal Reserve Chair Jerome Powell said inflation remains elevated. He indicated at a press conference last week that more interest rate increases would follow to bring inflation down to its 2% target rate.
“For investors, the Fed’s tightening still presents the risk of pushing the economy into a recession in 2023,” Realtor.com Senior Economist Georg Ratiu said in statement.
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The drop in mortgage rates over the last several weeks helped boost applications for both purchases and refinances last week, Ratiu said. That’s likely to keep improving as the housing inventory improves, he said.
“With more homes available for sale, and more of them sporting price cuts, some buyers are running the math and finding that the slide in rates is offering better options within their budgets,” Ratiu said.
Mortgage rates could drop to the 5.5% to 6% range in 2023 if inflation keeps improving, and would provide the housing market with “an improved foundation,” Ratiu said.
Homebuyers are also set to get a reprieve from record-high home prices. Redfin’s 2023 housing forecast sees home sales sinking to their lowest level in more than a decade.
“We expect the median U.S. home-sale price to drop by roughly 4% – the first annual drop since 2012 – to $368,000 in 2023,” Redfin said. “Prices would fall more if not for a lack of homes for sale: We expect new listings to continue declining through most of next year, keeping total inventory near historic lows and preventing prices from plummeting.”
If you are looking to purchase a home or refinance your current loan, you can consider an online marketplace like Credible to compare your options. Visit Credible to compare multiple mortgage lenders at once and find the one that is the best fit for you.
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