Mortgage rates continue to slide as economic worries remain

Mortgage rates continued their slide this week as continued concerns over the economy have pushed yields on the 10-year Treasury down even further.

The Freddie Mac Primary Mortgage Market Survey for the week ended Dec. 8 reported the 30-year fixed rate mortgage averaged 6.33%, a drop of 16 basis points from 6.49% seven days prior. A year ago at this time, the 30-year FRM averaged 3.1%.

In the Nov. 10 survey, Freddie Mac calculated the 30-year FRM averaged 7.08%. However, a favorable Consumer Price Index report released that morning began driving rates down.

“Over the last four weeks, mortgage rates have declined three-quarters of a point, the largest decline since 2008,” Freddie Mac Chief Economist Sam Khater said in a press release. “While the decline in rates has been large, homebuyer sentiment remains low with no major positive reaction in purchase demand to these lower rates.”

On Nov. 29, the benchmark 10-year Treasury yield peaked at 3.75%. In the succeeding days, the primary movement has been lower, ending Dec. 7 trading at 3.41%. However, the yield did tick back up 6 basis points by noon on Thursday.

Falling prices are also not moving the market. 

“Despite the ongoing decline in mortgage rates that started in October, prospective homebuyers continue to delay decisions to purchase homes, even as home prices flatten or fall,” Bob Broeksmit, president and CEO of the Mortgage Bankers Association said in a Thursday morning statement referencing its Weekly Application Survey. “The average loan size for a purchase application last week was at its lowest level in nearly two years, another indication that home prices are cooling.”

Statements from Federal Reserve Chairman Jerome Powell on Nov. 30 were the primary driver of this week’s decline, added Matthew Speakman, Zillow Home Loans senior economist, in a statement issued Wednesday night.

“There he noted the Fed had seen signs that inflation was continuing to cool and hinted the central bank was ready to scale back on their program of tightening monetary policy,” Speakman said. “The inflation dynamic remains investors’ chief focus; mortgage rates barely budged in response to the monthly jobs report, a release that usually tends to move markets.”

And rates are likely to fall even further in the next week as the markets wait for new inflation data, and another statement from Powell, to come out.

“But recent rate movements indicate that markets are evaluating their positions as those important releases approach,” Speakman continued. “Data released on Wednesday showed labor costs were much cheaper than expected in the year’s third quarter, something the market may be interpreting as another sign of waning inflation.”

The 15-year FRM fell by 9 basis points during the week to 5.67% from 5.76%. For the same period in 2021, the 15-year FRM averaged 2.38%.