Mortgage rates fall for third consecutive week

Mortgage rates continued to drop as the markets continue to read signs from Federal Reserve Board members that indicate it might ease the throttle on short-term hikes in its December meeting.

The Freddie Mac Primary Mortgage Market Survey found the average for the 30-year fixed-rate loan fell 9 basis points for the week of Dec. 1 to 6.49%. Over the past three weeks, since a favorable Consumer Price Index report came out, the 30-year FRM is down 59 basis points.

“Investors have clearly viewed the inflation report — which hinted at a long-awaited deceleration in consumer price growth — as evidence that the Fed will take its foot off the macroeconomic brake and slow its pace of interest rate hikes,” said Matthew Speakman, senior economist at Zillow Home Loans, in a statement issued Wednesday night. “This hypothesis seemed to be validated on Wednesday, as Fed Chair [Jerome] Powell signaled in a speech that the central bank is likely to decelerate its pace of rate increases beginning in their December meeting and are seeing signs that further inflation slowdowns should be coming in the next few months.”

A week ago, the 30-year FRM averaged 6.58%, while a year ago at this time, it was 3.11%.

“Mortgage rates continued to drop this week as optimism grows around the prospect that the Federal Reserve will slow its pace of rate hikes,” said Sam Khater, Freddie Mac chief economist, in a press release. “Even as rates decrease and house prices soften, economic uncertainty continues to limit homebuyer demand as we enter the last month of the year.”

The 10-year Treasury yield, the benchmark for the 30-year FRM, closed on Nov. 23 at 3.71%. While on Nov. 30, it closed at 3.7%, it opened the following morning at 3.59%.

“Although housing remains challenged, the recent 50 basis point decline in rates along with a 5% price decline results in a 9%-to-10% lower mortgage payment,” said Keefe, Bruyette & Woods analyst Jade Rahmani in a Nov. 30 report. “While it’s too early to get excited, a 100 basis point rate decrease associates with a 10%-to-15% increase in home sales, which could occur in spring.”

Over the past week, Zillow’s mortgage rate tracker had the 30-year FRM average falling to 6.09% on Thursday morning from 6.23%. However, reflecting the drop in the 10-year yield, the rate fell 11 basis points from 6.2% from Wednesday to Thursday.

The Mortgage Bankers Association Weekly Application Survey for this week put the average for the 30-year conforming loan at 6.49%.

“The 30-year fixed mortgage rate has fallen nearly 60 basis points over the past four weeks, which has drawn some prospective buyers back to the market,” Bob Broeksmit, the MBA’s president and CEO said in a statement issued Thursday morning before the Freddie Mac release. “With signs of economic slowing both in the U.S. and globally, mortgage rates will remain volatile but are likely to continue to trend downward.”

In the same comments that sent rates down, Powell said more work needs to be done to bring inflation under control. 

“And there are plenty of blockbuster economic data releases on the horizon and geopolitical dynamics that could alter this outlook,” Speakman said. “But it’s likely that mortgage rates will enjoy more calm, and are likely to ease down, leading up to the next key CPI report, due in a couple of weeks.”

The other rate that Freddie Mac reports for, the 15-year FRM, fell 14 basis points on a week-to-week basis, to 5.76% from 5.9%. However, a year ago, the 15-year FRM averaged 2.39%.