Mortgage rates fell this week as economic data showed the economy slowing.
The 30-year fixed-rate mortgage averaged 6.15% in the week ending January 19, down from 6.33% the week before, according to Freddie Mac. Last year, the 30-year fixed rate was 3.56%.
“As rates continue to decline, mortgage rates have fallen again this week,” said Sam Khater, Freddie Mac’s chief economist.
“Prices are at their lowest level since September of last year, boosting homebuyer demand and building sentiment. “The reduction in rates is providing a much-needed boost to the housing market, but the supply of housing remains a concern,” he added.
Mortgage rates are expected to rise through most of 2022, prompting the Federal Reserve’s forecast of heavy interest rate hikes to combat rising costs. But mortgage rates fell in November and December, after data showed inflation may have finally peaked.
Last week the Consumer Price Index for December showed a decrease in overall prices over the previous month by 0.1%. These data signaled to investors that the Federal Reserve will reduce interest rate hikes if inflation continues to slow. Mortgage rates are expected to remain unchanged until the Fed’s rate hikes end.
Mortgage rates are based on mortgage applications that Freddie Mac receives from thousands of lenders nationwide. The survey only includes borrowers who put down 20% and have better credit. Most buyers with lower down payments or less credit will pay more than the average rate.
The average rate for a fixed-term mortgage fell after the 10-year Treasury note, which fell from 3.75% at the beginning of the month to 3.37% this week.
The Fed does not set the interest rates that borrowers pay directly on mortgages. But his actions affect them. Mortgage rates typically track the yield on 10-year US Treasury bonds, which is based on a combination of expectations about the Fed’s actions, the Fed’s actual actions and responses. of businessmen.
When Treasury rates go up, so do mortgage rates; when it goes down, mortgage rates usually follow.
“Although the slowdown in December inflation is a positive sign, concerns from businesses and investors about economic growth continue to rise due to weak consumer data. it reminds us that the American consumer cannot be defeated,” said Jiayi Xu, Realtor.com economist.
The labor market is one of the areas of the economy that remains strong – despite some high levels of suspension in the technology sector.
“Through December, unemployment remained low across the country, as businesses and investors continued to look for the end of the Fed’s rate hikes in order for confidence to return. in the market,” Xu said.
Home sales in the U.S. have fallen sharply over the past year due to rising interest rates, and prices are expected to remain volatile in the first part of the year.
“While our 2023 forecast anticipates continued inflation causing upward pressure on rates, recent data has helped pull down mortgage rates,” the said Xu. “As the economy faces deflation, mortgage rates may continue to fluctuate in the short term, within the 6% to 7% range we’ve seen over the past five months. .”
Recently low mortgage rates have improved the mood of home buyers and applications have increased, jumping 28% in the last week, according to the Mortgage Bankers Association.
“Mortgage rates are nearly a percentage point lower than the high reported last October, which is good news for families looking to buy a home,” said Bob Broeksmit, MBA. president and CEO.
However, prices have almost doubled in the past year, it is still difficult for many buyers to buy a house. This is exacerbated by homeowners who are reluctant to sell and part with the lowest mortgage rates they have secured in the past few years.
“For people who are thinking of selling their homes, the current market conditions may cause them to stop,” said Xu. “The latest data shows that December home buyers faced more competition from other sellers, longer time on the market, and more opportunity to lower their prices. The some are waiting to see if the market improves before putting their homes up for sale.”