In recent weeks, US mortgage rates have seen a sustained drop, bringing positive news for home buyers grappling with the challenges of the least affordable housing market since the 1980s. After dipping below 7% in early December for the first time since mid-August, rates experienced another decline in the most recent data.
The 30-year fixed-rate mortgage rate averaged 6.61% in the week ending December 28, down from 6.67% the previous week and significantly lower than the 6.42% recorded a year ago, according to Freddie Mac’s latest release. This marks the ninth consecutive week of declining mortgage rates, influenced by the anticipation of Federal Reserve rate cuts expected to commence in the upcoming year.
The average mortgage rate is derived from mortgage applications received by Freddie Mac from numerous lenders nationwide. Notably, the survey considers borrowers who put down 20% and possess excellent credit. It’s crucial to recognize that individual buyer rates may vary. Sam Khater, Freddie Mac’s chief economist, noted that while the rapid descent of mortgage rates over the past two months stabilized somewhat this week, the overall trend continues to point downward. Realtor.com economist Jiayi Xu, however, advised caution in interpreting the latest mortgage rates, characterizing it as a “noisy” period influenced by holiday-driven fluctuations.
Looking ahead to 2024, economists anticipate further declines in mortgage rates. Federal Reserve officials have recently projected a median of three rate cuts in the coming year, which could exert additional downward pressure on mortgage rates. Although the central bank doesn’t directly set borrower interest rates, its actions have a considerable impact. Mortgage rates closely follow the yield on 10-year US Treasuries, influenced by expectations about the Fed’s actions, policy changes, and investors’ reactions.
Despite the decline in mortgage rates, there hasn’t been a substantial sales recovery yet, attributed to a lack of housing inventory that continues to support home prices. Nevertheless, Khater remains optimistic, predicting a potential nascent rebound in the housing market in the coming year, especially if inflation continues to decelerate. The recent drop in mortgage rates signifies a positive development for prospective home buyers, with expectations of further declines and a potential housing market rebound on the horizon.
