The Great Pumpkin brought homebuyers a big present this Halloween: Mortgage rates’ biggest slide in a year.
The contract rate on the average 30-year fixed-rate mortgage declined 25 basis points last week to 7.61 percent, Bloomberg reported. That’s the lowest average mortgage rate recorded by the Mortgage Bankers Association since the end of September and a change from rates hovering around 8 percent.
The decline in rates brought more activity from buyers in the week ending on Nov. 3. Mortgage applications for home purchases rose 3 percent from the previous week, according to the MBA. The overall index rose 2.5 percent from the preceding week’s 28-year low, including an increase in refinancing activity.
While mortgage rates and the Federal Reserve’s interest rates aren’t directly correlated, the Fed’s decision last week to hold interest rates the same for the second straight monthly meeting may have done buyers a favor. The 10-year Treasury yield, which tracks more closely with mortgage rates, came down from its peak last week.
The spike in mortgage rates from pandemic lows pushed the housing market into a dry spell as buyers were sidelined by prohibitive purchasing costs. The MBA, National Association of Realtors and National Association of Home Builders made public appeals to Federal Reserve Chair Jerome Powell to stop with the rate hikes, citing concerns over how further damage to the market.
The next question for prospective homeowners will be whether or not the relief in rates will continue and whether or not the specter of 8 percent mortgage rates will rear its head again.
The peak may have been hit and steady declines should come in the next couple of years, property economonist Thomas Ryan of Capital Economics said in a note, forecasting rates likely won’t fall below 6 percent before the end of 2025.
“That will keep affordability stretched and dampen any potential of a major recovery in housing activity,” Ryan said in a note.
— Holden Walter-Warner