After a steady climb up and over the 7% mark, the latest mortgage rates tumbled this week on expectations that the rise in interest rates by the Fed may have hit its peak.
According to the latest Primary Mortgage Market Survey® (PMMS®) from Freddie Mac, the 30-year fixed-rate mortgage (FRM) averaged 6.61% this week.
The numbers:
- 30-year fixed-rate mortgage averaged 6.61% as of November 17, 2022, down from last week when it averaged 7.08%. A year ago at this time, the 30-year FRM averaged 3.10%.
- 15-year fixed-rate mortgage averaged 5.98%, down from last week when it averaged 6.38%. A year ago at this time, the 15-year FRM averaged 2.39%.
What the experts think:
“Mortgage rates tumbled this week due to incoming data that suggests inflation may have peaked,” said Sam Khater, Freddie Mac’s chief economist. “While the decline in mortgage rates is welcome news, there is still a long road ahead for the housing market. Inflation remains elevated, the Federal Reserve is likely to keep interest rates high and consumers will continue to feel the impact.”
Khater added, “Over the last fifty years, Freddie Mac has closely monitored the trajectory of mortgage rates. This week we are launching enhancements* to our Primary Mortgage Market Survey methodology that will increase its accuracy and reliability. This new approach will incorporate more detailed data and monitor real-time mortgage rates more closely.”
Bright MLS Chief Economist Dr. Lisa Sturtevant commented:
“Mortgage rates fell as the market continues to react to October’s lower-than-expected inflation report. The average rate on a 30-year fixed rate mortgage fell by nearly half a percentage point from last week to 6.61%. This is the lowest level since early October and suggests that mortgage rates may have peaked.
“The decline in mortgage rates is welcome; however, the fast-rising rates over the past few months has taken a toll on the housing market. Sales are down in some markets to their lowest levels in more than a decade. Buyers have seen their purchasing power seriously eroded. Move-up buyers who are able to roll significant equity in a new home purchase have fared better than first-time buyers who have been forced to sit the market out amidst higher rates.
“There likely will be ongoing volatility in rates amidst economic uncertainty. Prospective buyers may be tempted to try to “time” rates to try to jump into the market when rates dip. But timing rates is difficult. In the Mid-Atlantic region, for example, there was no noticeable uptick in new contract activity last week as rates dipped.
“Buyers would be better served to shop rates, getting quotes from multiple lenders. There is a lot of variability in rates, terms, and mortgage products in this changing market. It is more important than ever that buyers compare offers from different lenders to find the financing that works best for them.
“Looking ahead, mortgage rates should fall further in 2023, but don’t expect them to come down as fast as they ran up. Housing market activity will continue to be relatively sluggish—even if mortgage rates do begin to come down—since so many existing homeowners are locked into sub-three percent loans and will still not be eager to move into a higher rate. Buyers will continue to see relatively low inventory in early 2023.”
Realtor.com manager of economic research, George Ratiu, commented:
“The Freddie Mac fixed rate for a 30-year loan declined 47 basis points from last week, to 6.61%, as investors reacted to the moderation in the Consumer Price Index data. The 10-year Treasury dropped from 4.15% last Wednesday to 3.78% today, as capital markets seemed to cheer the slowdown in inflation as a sign that the Federal Reserve’s monetary tightening is having its intended effect, and anticipating that the central bank’s rate hikes may begin to moderate or taper in the months ahead. While the Fed indicated at this month’s meeting that it will consider changes in inflation metrics in its rate setting, it also highlighted that it does not expect to back off its hawkish stance on inflation until it sees prices running closer to the desired target of 2%.
“For consumers, quickly rising prices have added significant financial pressures, especially as inflation erodes any wage gains. The Fed’s report on household debt noted that credit-card balances jumped at their highest rate in more than 20 years in the third quarter, ballooning to $930 billion. The Fed’s rate hikes are directly tied to higher interest rates for credit cards and car loans, which along with higher mortgage debt, add additional burdens to household finances.
“The downshift in mortgage rates over the past week brought a sliver of relief to buyers looking to lock in their rate. At last week’s 7.08% and assuming a 20% down payment, the buyer of a median-priced home was facing a monthly payment of about $2,280. At 6.61%, the same buyer would see their payment slide to $2,174. While the monthly savings may seem small, over the course of a 30-year loan period, the buyer would save close to $48,000 in interest.
“At the same time, the sharp volatility in mortgage rates is causing a large degree of uncertainty for buyers and sellers in the current market. On one hand, sellers have been coming to terms with the fact that homes priced for the housing market we experienced when rates were at 3.0% leave very few buyers able to manage the mortgage payments with today’s rates. Realtor.com’s October inventory report showed that 21% of listings have seen price cuts, as sellers adjust their strategy to meet buyers in a changing financial landscape.
“On the other hand, buyers may hesitate to move forward with transactions if they find the erratic nature of current mortgage rates disconcerting. Some buyers may want to wait and see If rates will drop even lower. However, with inflation still north of 7% and the Fed committed to keep increasing the funds rate over the next few months, the mortgage market is not out of the woods. We may still see rates rebound back above 7% before the end of the year.” Ratiu concluded.
*Note: The mortgage rate data released today reflect a change in Freddie Mac’s methodology. Instead of collecting rate data from a monthly survey of lenders, Freddie Mac is now reporting data collected from a daily mortgage applications database. The enhanced methodology allows Freddie Mac to provide a more “real-time” look at mortgage rates. The data collected through the new approach track very closely with the data collected via the survey approach (dating back to 2005), which is important for monitoring historical trends.
According to Freddie Mac, “Freddie Mac recently announced a number of PMMS® enhancements to improve the collection, quality and diversity of data used. Instead of surveying lenders, the weekly results are now based on thousands of applications from across the country that are submitted to Freddie Mac when a borrower applies for a mortgage. Additionally, the PMMS® will no longer publish fees/points or adjustable rates. The newly recast PMMS® was put in place this week.”
