Borrowing costs have fallen to their lowest level in more than a month.
The average rate for the 30-year fixed-rate mortgage dialed back to 6.69% this week, falling from 6.81% the previous week, Freddie Mac reported Thursday. It marks the lowest average in more than a month, and the drop was enough to push up mortgage application activity, a gauge of homebuying activity.
“The responsiveness of prospective home buyers to even small changes in rates illustrates that affordability headwinds persist” in the housing market, says Sam Khater, Freddie Mac’s chief economist. Mortgage applications for home purchases jumped 6% in the latest week, the highest level since January, according to the Mortgage Bankers Association.
The drop in mortgage rates, although modest, may be helping prospective buyers increase their purchasing power. “Rates in the mid-6s are more palatable than the near-7% of November,” says Jessica Lautz, deputy chief economist at the National Association of REALTORS®. At this week’s average, a monthly mortgage payment, assuming a 20% down payment, would be about $2,063 on a $400,000 home. With a 10% down payment, the monthly payment would average $2,321, Lautz says.
The drop in rates also coincides with an uptick in housing inventory nationally, which may provide potential home buyers with “the chance in late fall to finally move off the sidelines,” Lautz adds. Nationwide, housing inventory is up nearly 20% compared to a year ago, according to NAR data, which can be attributed to recent upticks in home sales. Existing-home sales in October were up nearly 3% compared to a year earlier—the first annual gain since July 2021. Pending home sales, a gauge measuring contract signings for home purchases, were up more than 5% in October compared to a year earlier, according to NAR.
Still, “there is a long way to go before there is enough housing inventory for the pent-up demand in the housing market,” Lautz says. “While there is a growth of existing homes, the inventory is still below February of 2020.”
Freddie Mac reports the following averages in mortgage rates for the week ending Dec. 5:
- 30-year fixed-rate mortgages: averaged 6.69%, dropping from last week’s 6.81% average. A year ago, 30-year rates averaged 7.03%.
- 15-year fixed-rate mortgages: averaged 5.96%, also falling from last week when 15-year rates averaged 6.1%. Last year at this time, 15-year rates averaged 6.29%.
Source: nar.realtor
