Largest One-Week Drop in 30-Year Mortgage Rates Spurs Demand

In the week ending November 9, as 10-year Treasury yields saw a significant decline, the average 30-year fixed mortgage rate also exhibited a notable decrease of 26 basis points, marking the most substantial one-week drop since November of the prior year.

According to the Primary Mortgage Market Survey by Freddie Mac, the 30-year fixed mortgage averaged 7.5% as of November 9. This figure represents a significant decrease from the preceding week’s rate of 7.76%, although it is higher than the 7.08% rate recorded during the same week in the previous year.

Bright MLS Chief Economist, Lisa Sturtevant, noted that while the mortgage rates have risen, the gap between current rates and those from a year ago has narrowed. At present rates, the typical monthly mortgage payment stands at approximately $3,000, marking an increase of only $250 compared to a year ago.

HousingWire’s Mortgage Rates Center reported that Optimal Blue’s average 30-year fixed rate for conventional loans was 7.444% on Thursday, reflecting a decrease from the previous week’s rate of 7.576%.

The Chief Economist of Freddie Mac, Sam Khater, highlighted the rising household debt, primarily stemming from mortgage, credit card, and student loan balances. The increased cost of living has left many consumers feeling strained, with the housing market remaining stagnant unless there is a significant decrease in mortgage rates.

The lower mortgage rates have spurred an uptick in mortgage demand, leading to a 2.5% increase in total mortgage applications for the week ending November 3, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey released on Wednesday.

Joel Kan, MBA’s Vice President and Deputy Chief Economist, noted that applications for both purchase and refinance loans increased over the week, although they remained at relatively low levels. The purchase index still lags by over 20% compared to the previous year’s pace, as numerous homebuyers continue to wait on the sidelines for more available inventory.

While some homebuyers are seizing the opportunity to secure a lower rate, others are opting to wait until 2024 in hopes of finding even lower rates and a more extensive selection of homes on the market.

Nevertheless, it is important to note that while rates are expected to decrease in the coming year, they are unlikely to return to their pre-pandemic levels. According to Lisa Sturtevant, this represents a new era for mortgage rates, with prospective homebuyers anticipating rates to stabilize above 6%.

Investors are eagerly awaiting new inflation data set to be released on Tuesday, which will provide further insights into the Federal Reserve’s future monetary policy direction. Chen Zhao, Senior Manager of the Economics Team at Redfin, pointed out that futures markets are currently indicating a 4.5% probability of an interest rate hike in the next Federal Reserve meeting.