Mortgage rates fall for the fifth straight week | CNN Business

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Mortgage rates fell again this week, falling for the fifth consecutive week.

The average 30-year mortgage rate was 6.31% in the week ended Dec. 15, down from 6.33% in the previous week, according to Freddie Mac. A year ago, the 30-year flat rate was 3.12%.

Mortgage rates have been rising throughout most of 2022, spurred by the Federal Reserve’s unprecedented campaign of draconian interest rate increases to tame spiraling inflation. But mortgage rates have fallen in the past several years Weeks later, data showed that inflation had finally peaked.

Inflation, as measured by the Consumer Price Index, slowed significantly in November and was at its lowest level in nearly a year, according to the closely watched Bureau of Labor Statistics indicator, released on Tuesday.

However, the Fed announced on Wednesday that it will continue to raise interest rates – albeit by a smaller amount than it has been, while acknowledging that inflation is easing. A rate hike is already factored in where mortgage rates are, but it pointed to more good news on inflation.

“Mortgage rates continued their downward trajectory this week, as weak inflation data and a modest shift in Fed monetary policy reverberated through the economy,” said Sam Khater, chief economist at Freddie Mac.

“The good news for the housing market is that the recent declines in prices have stabilized purchase demand,” he added. “The bad news is that demand remains very weak in the face of affordability hurdles that remain very high.”

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. Many buyers who offer less money up front or have less than perfect credit will pay more than the average price.

“While investors were largely anticipating this move, the Fed signaled to capital markets at yesterday’s meeting that it sees its strong monetary tightening as impacting inflation,” said George Ratiu, director of economic research at Realtor.com.

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. When that rate goes up, the 30-year fixed-rate mortgage usually goes up, too. When the Treasury rate falls, mortgage rates also fall.

But this is not the end of the price hike.

Fed Chairman Jerome Powell stated in his remarks that as prices continue to rise at a high rate, more rate increases are needed and the central bank remains committed to raising interest rates until the pace of inflation slows significantly, Ratiu said.

“For investors, Fed tightening still presents the risk of tipping the economy into recession in 2023,” he said. However, most economic indicators are still showing signs of resilience. In addition, this week’s CPI data showed a continued moderation in the price growth path.

What this means for real estate markets, Ratiu said, is that continued calm in inflationary measures should ease upward pressure on mortgage rates.

“While a return to the 3.0% range is unlikely in the near future, even a settlement of rates in the 5.5%-6.0% range in 2023 would provide housing markets with an improved foundation,” he said.

For people looking to buy a home, and homeowners looking to sell, the decline in mortgage rates over the past several weeks has been welcome.

“With more homes for sale, and more price cuts sporting, some buyers are doing the math and finding that lower prices offer better options within their budgets,” Ratiu said.

After a month of decline, mortgage applications rose last week as buyers looked to take advantage of several weeks of slightly lower prices, according to the Mortgage Bankers Association.

“Overall, orders have increased, driven by increases in buying and refinancing activity,” said Joel Kahn, MBA Vice President and Deputy Chief Economist. “However, with rates over three percentage points higher than last year, requisitions and refinancing still lag far behind last year’s pace.”

MBA expects the recent downward trend in mortgage rates to continue, said Bob Broxsmith, president and CEO of MBA. He said these lower rates, along with moderate home prices, should encourage more homebuyers to return to the market in early 2023.