Average mortgage rate plunges to 7.03%, lowest since August
The average 30-year fixed mortgage rate fell to its lowest point since August, 7.03%, for the week ending Thursday, mortgage giant Freddie Mac reported. The average had climbed as high as 7.79% in late October.
Mortgage rates have fallen as economic data provides evidence the Fed’s campaign to cool off inflation is working. That has helped erase a climb that had some borrowers facing 8% rates in October.
Falling mortgage rates make buying a home more affordable. A Long Island homebuyer taking out a $500,000 mortgage would see a 7.2% drop in monthly payment to $3,336, excluding taxes and insurance, based on the decline in the average mortgage rate over the past six weeks.
Still, mortgage rates have increased substantially in the past few years. Last year at this time, the average was 6.33%. Two years ago, the 30-year fixed average was less than half its current level, at 3.1%.
Last week, the Fed's preferred gauge of inflation, the personal consumption expenditures price index, showed consumer prices rose 0.2% in October, which was down from 0.7% in September. That has added to speculation that the Fed might be done hiking interest rates.
"Slower inflation and financial markets anticipating the potential end of the Fed’s hiking cycle are both behind the recent decline in rates,” Joel Kan, deputy chief economist at the Mortgage Bankers Association in Washington, D.C., said in a statement.
Mortgage rates tend to move in the same direction as the 10-year Treasury yield, which fell to its lowest level since early September this week.
Nationwide, mortgage applications rose in November as rates started to fall, but that uptick has started to taper off, Freddie Mac chief economist Sam Khater said in a statement.
“When rates began to rapidly drop, purchase applications rebounded initially, but this improvement in demand diminished in the last week," Khater said. “Although these lower rates remain a welcome relief, it is clear they will have to further drop to more consistently reinvigorate demand."
Even with lower rates, Long Island homebuyers continue to contend with a shortage of homes for sale, which has helped keep prices high.
"We're certainly seeing some relief," Zahra Jafri, president of Lynx Mortgage Bank in Westbury, said of the drop in rates. "Now we just need inventory."
The median home price in Suffolk County was a record $600,000 in October and in Nassau the median was a near-record $725,000, according to OneKey MLS.
Unfortunately for buyers, as rates fall, home prices tend to rise. Jafri said buyers should take action if they find a deal in which they're comfortable with their monthly housing payment.
"With rates going back down a little bit, it could create some of those bidding wars again," Jafri said.
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