Freddie Mac’s weekly Primary Mortgage Market Survey report released Thursday shows that mortgage rates dipped below 7% “as the dynamics of a once-hot housing market have faded considerably,” said Sam Khater, Freddie Mac’s Chief Economist.
“Unsure buyers navigating an unpredictable landscape keeps demand declining, while other potential buyers remain sidelined from an affordability standpoint," Khater said.
He added that Wednesday’s 0.75-basis-point rate hike by the Federal Reserve “will certainly inject additional lead into the heels of the housing market.”
According to the report:
- The 30-year fixed-rate mortgage averaged 6.95% with an average 0.8 point as of Nov. 3, 2022, down from last week when it averaged 7.08%. A year ago at this time, the 30-year FRM averaged 3.09%.
- The 15-year fixed-rate mortgage averaged 6.29% with an average 1.2 point, down from last week when it averaged 6.36%. A year ago at this time, the 15-year FRM averaged 2.35%.
- The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 5.95% with an average 0.2 point, down from last week when it averaged 5.96%. A year ago at this time, the 5-year ARM averaged 2.54%.
Bob Broeksmit, CMB, president and CEO of the Mortgage Bankers Association (MBA), said Thursday that despite a drop in mortgage rates last week, mortgage applications declined for the sixth consecutive week as households remain reluctant to borrow at rates that are much higher than earlier this year.
“The Federal Reserve’s continued quantitative tightening, as well as growing signs of a slowing economy, are expected to keep mortgage rates volatile in the near term,” Broeksmit said. “MBA expects rates to end the year around 6.7%.”
George Ratiu, Realtor.com’s manager of economic research, said Thursday that with inflation still running at a 40-year high and the Fed expecting a few more rate increases to combat it, mortgage rates will experience upward pressure through the end of 2022.
“With mortgage rates almost 400 basis points higher than last year, today’s buyer of a median-priced home is looking at a monthly mortgage payment that is $965 higher,” Ratiu said. “The dramatic jump in financing costs has effectively shrunk most buyers’ budgets.”
Ratiu added that affordability issues put buying significantly out of reach for many.
“Based on September 2021’s median home price and 30-year fixed rate, and assuming a 20% down payment, a typical homebuyer would have been looking at a $1,296 monthly payment. This year, due to both higher prices and interest rates, a typical buyer is facing a $2,261 monthly payment,” he said. “In order for this year’s buyer to have the same monthly payment as last year, given a 7% interest rate, the median home price would have to decline by 45%, to about $235,000.
Ratiu added that he expects transactions to continue to decline and prices to continue to fall.
Zillow Home Loans Senior Economist Matthew Speakman said mortgage rates — which are influenced by bond yields — seem likely to rise in the next day or two, but added that it’s not unusual for rates to take a couple days to truly react to Fed statements, especially in today’s economic climate.
“Further clouding the picture for investors are the upcoming release of Friday’s October jobs report and next week’s reading on inflation — two reports that should shed even more light on the economy’s current and future state,” Speakman said. “All told, the calm waters on which mortgage rates have recently sailed appear likely to get choppier.”
Freddie Mac's survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.
