Mortgage rates trend down for the third straight week

Mortgage applications increased to their highest weekly pace in five weeks

Mortgage rates fell this week as the October inflation report drove down the yield on the 10-year Treasury. On Thursday, investors priced in a 99.7% chance that the Fed will hold interest rates steady in December, according to the CME Group’s FedWatch tool.

The 30-year, fixed mortgage averaged at 7.44% as of Nov. 16, according to Freddie Mac‘s Primary Mortgage Market Survey. That’s down six basis points from last week’s 7.5% and up from 6.61% the same week a year ago.

HousingWire’s Mortgage Rates Center showed Optimal Blue’s average 30-year fixed rate on conventional loans at 7.409% on Thursday, compared to 7.444% the previous week.

However, there is room for mortgage rates to fall further, according to Bright MLS Chief Economist Lisa Sturtevant. Historically, the gap between the 10-year Treasury yield and the 30-year fixed rate mortgage rate hovered around 180 basis points. The current 30-year mortgage rate remains 280 basis points higher than the bond yield.  

“The combination of continued economic strength, lower inflation and lower mortgage rates should likely bring more potential homebuyers into the market,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

Mortgage applications increased for the past two straight weeks thanks to the continued decline in mortgage rates.

Healthier economic data is a sign of better days ahead for the housing market

In October, core inflation, which includes goods and services excluding volatile food and energy, slowed on a monthly basis, indicating that the Fed’s restrictive monetary policy is yielding results. The labor market also cooled in October. However, mortgage rates will not come down quickly, Sturtevant cautioned, nor will they go back to the sub-5% level recorded since the Great Recession. 

“However, some homebuyers are trying to act opportunistically this fall to take advantage of the dip in rates,” she said.

“A major constraint continues to be very limited inventory. For those homebuyers who can wait, the spring will bring more new listings and lower mortgage rates.

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