Mortgage Rates Resume Slide: Freddie Mac

Money; Getty Images
Money; Getty Images

Average mortgage rates saw a downward tick this week.

The 30-year fixed-rate loan is now averaging 6.33%, a decrease of 0.15 percentage points according to Freddie Mac. The average rate on a 15-year fixed-rate loan saw a larger decline, moving 0.21 percentage points lower to 5.52%.

“While mortgage rates have resumed their decline, the market remains hypersensitive to rate movements, with purchase demand experiencing large swings relative to small changes in rates,” said Sam Khater, Freddie Mac’s chief economist, in a press release.

The slide in mortgage rates that marked the end of 2022 — when rates dropped by about half a percentage point over a two-month period — provided a small boost to consumer confidence in the housing market.

“Over the last few weeks, latent demand has been on display with buyers jumping in and out of the market as rates move,” according to Khater.

In a recent survey from Fannie Mae, 21% of respondents said they believe now is a good time to buy a home, up from 16% last fall. Still, today’s housing market is far from “normal” — home prices are still high and mortgage rates remain nearly double what they were a year ago.

“As we enter 2023, we expect affordability to remain the top challenge for potential homebuyers,” ” Fannie Mae senior vice president and chief economist Doug Duncan said in a press release.

Mortgage rates move lower

There was moderate rate movement this week as market observers tried to balance conflicting economic data.

On the positive side, wage growth and consumer prices have eased, putting downward pressure on rates. On the other hand, employment data and consumer confidence remained higher than expected, which tend to keep rates elevated.

This deadlock between those two forces may finally break over the coming weeks, however. Earlier today, the Bureau of Labor Statistics released the Consumer Price Index, which indicated that year-over-year price growth of 6.5%, in line with market expectations. That’s the smallest year-over-year increase since October 2021 — and a likely sign that the Federal Reserve’s strategy to reduce inflation is working.

Beginning in March of last year, the Fed start implementing a series of increases in the federal funds rate as a tool to curb rising consumer prices. Throughout the year, the central bank implemented a total of seven increases, which took the fed fund rate from near zero to 4.5% by the end of 2022. The Fed’s aggressive rate increases led to higher interest rates in general and a stunningly fast pace of increase in mortgage rates in particular.

Market analysts are now turning to the Fed’s Federal Open Market Committee Meeting, which will take place between January 31 and February 1, where another rate hike is expected to be announced. What is uncertain is whether the central bank will opt for a 0.50 or a less aggressive 0.25 percentage point hike.

“The positive inflation and employment data will not interrupt the fed’s rate hike program,” said Lisa Sturtevant, chief economist at Bright MLS, in a statement. “But it offers hope that the Fed could be closer to achieving its price stability goals and could slow rate increases.”

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