Mortgage rates fall for the fourth consecutive week

washington d.c.

Mortgage rates fell slightly this week, with a slight rate hike by the Federal Reserve signaling a promising improvement in inflation.

The 30-year fixed-rate mortgage averaged 6.09% in the week ending Feb. 2, down 6.13% the previous week, according to Freddie Mac data released Thursday. A year ago, the 30-year fixed rate was 3.55%.

After climbing for most of 2022, spurred by sharp interest rate hikes from the Fed to rein in soaring inflation, mortgage rates have trended lower since November, alongside data that continues to show that inflation may have peaked.

Mortgage rates haven’t been this low since September and are now nearly a full point below last year’s high of 7.08%, last seen in early November.

“This one percentage point cut in rates can allow up to three million mortgage-ready consumers to qualify and afford a loan of $400,000, which is the median home price. “, said Sam Khater, chief economist of Freddie Mac.

The Fed approved a quarter point interest rate Wednesday hike, smallest since March. The decision to slow the pace of increases sends a clear signal that the central bank is seeing progress in its fight against inflation.

Although the Fed does not directly set the interest rates that borrowers pay on mortgages, its actions influence them. Mortgage rates tend to follow the yield of 10-year US Treasury bonds, which move based on a combination of anticipation of Fed actions, what the Fed is actually doing, and investor reactions. When Treasury yields rise, mortgage rates also rise; when they fall, mortgage rates tend to follow.

As inflationary pressures ease, mortgage originators have followed suit, reducing the cost of borrowing, said George Ratiu, head of economic research at

The effect of the Fed’s actions is to keep a floor below short-term mortgage rates, he said, adding that he expects rates to stay around 6% over the next few weeks. .

“The Federal Reserve controls short-term rates, but long-term rates, including 30-year mortgage rates, are a function of market expectations about the path of the economy,” said Mike Fratantoni, vice president. Senior Chairman and Chief Economist at Mortgage. Bankers Association. “And investors are betting that the economic slowdown and the Fed’s eventual victory over inflation will lead to lower rates over time.”

The MBA forecasts a modest decline in mortgage rates through 2023, ending closer to 5%.

Other economic data plays a role in the movement of mortgage rates, including employment reports and inflation.

“The latest indicators point to a still resilient economy,” Ratiu said. Labor market remains tight despite Fed efforts to calm economy: Wednesday’s Job Openings and Labor Rotation Survey, or JOLTS, showed there were 11 million job openings in December, the highest since July.

Housing and mortgage market economists are looking to the next inflation report, due out Feb. 14, to see if the pace of price increases continues to slow.

Even with lower rates in recent weeks, mortgage applications fell 9% last week compared to the previous week, according to MBA.

“Overall application activity declined last week, despite lower rates, indicating a still volatile time of year for real estate activity,” said Joel Kan, vice president and deputy chief economist. of the MBA. “Buying activity should pick up with the start of the spring home buying season, supported by lower rates and moderate growth in home prices. Both trends will help some buyers regain purchasing power.

For housing markets, lower rates have eased the financial burden on homebuyers, Ratiu said.

Housing market data for January showed an increasing number of homes for sale, properties lingering longer on the market and prices down 11% from their 2022 peak, according to

“For today’s buyer of a median-priced home, the down payment amount is lower than it would have been last summer,” Ratiu said. “While this is good news, affordability remains a major challenge, especially for first-time buyers.”

The average mortgage rate is based on the mortgage applications Freddie Mac receives from thousands of lenders across the country. The survey only includes borrowers who have a 20% down payment and have excellent credit. Many buyers who put less money up front or have less than ideal credit will pay more than the average rate.

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