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Mortgage rates fall to levels last seen in September

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Mortgage rates have declined this week as economic data has shown that inflation is easing.

The 30-year fixed-rate mortgage averaged 6.15% for the week ended Jan. 19, down from 6.33% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.56%.

“As inflation remains subdued, mortgage rates have dropped again this week,” said Sam Khater, chief economist at Freddie Mac.

“Rates are at their lowest level since last September, boosting buyer demand and builder sentiment. Falling rates are giving the housing market a much-needed boost, but home supply remains a lingering concern,” he added.

Mortgage rates rose through most of 2022, spurred by the Federal Reserve’s unprecedented campaign of severe interest rate hikes to tame rising inflation. But mortgage rates fell in November and December after data that showed inflation may have finally peaked.

Last week, the Consumer Price Index for December showed that overall prices fell 0.1% last month. This data signaled to investors that the Federal Reserve rate hike will slow if inflation continues to slow. Mortgage rates are expected to remain volatile until the Fed rate hikes end.

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

The average rate on a fixed-rate mortgage fell after the 10-year Treasury, which dropped from 3.75% at the start of the month to 3.37% this week.

The Fed does not directly set the interest rates that borrowers pay on mortgages. But your actions influence them. Mortgage rates tend to track the yield on 10-year US Treasuries, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does, and investor reactions.

When Treasury yields rise, so do mortgage rates; when they fall, mortgage rates tend to follow.

“While the slower inflation rate in December is a positive sign, concerns from businesses and investors about economic growth continue to mount as weaker retail sales data remind us that the US consumer is not invincible.” , said Jiayi Xu, an economist at

The job market is one sector of the economy that has remained relatively strong – despite some notable layoffs in the technology sector.

“Through December, unemployment across the country remained at long-term lows as businesses and investors continued to wait for the Fed’s rate hike to end for confidence to return to the market,” Xu said.

US home sales have dropped significantly over the past year as interest rates have risen, and rates are expected to remain volatile in the first part of the year.

“While our forecast for 2023 sees continued inflation causing upward pressure on rates, recent favorable data has helped bring mortgage rates down,” said Xu. “As the economy grapples with easing inflation, mortgage rates may continue to fluctuate in the near term, within the 6% to 7% range we have seen over the past five months.”

Recent lower mortgage rates have slightly improved homebuyer sentiment and applications have increased, jumping 28% in the past week, according to the Mortgage Bankers Association.

“Mortgage rates are now nearly one percentage point below their peak last October, which is good news for families looking to buy a home,” said Bob Broeksmit, president and CEO of MBA.

Still, with rates nearly double what they were a year ago, it’s still a challenge for many prospective buyers to purchase a home. This is exacerbated by homeowners who are reluctant to sell and give up the ultra-low mortgage rate they’ve secured in recent years.

“For people who are considering selling their home, current market conditions may be causing them to put it off,” said Xu. “Recent data shows that December home sellers faced more competition from other potential sellers, more time on the market, and a greater likelihood of having to lower their asking price. Some are waiting to see if the market improves before putting their home up for sale.”