U.S. Mortgage Rates Dip for Third Week in a Row While Applications Rise

The good news is that U.S. mortgage rates have dipped for the third week in a row. This is a welcome change for homebuyers and refinancers who are looking to take advantage of lower rates.

According to recent data, the average 30-year fixed mortgage rate has fallen to 3.73%. This is a significant drop from the 3.82% rate seen just a week ago.

As a result of these lower rates, mortgage applications have started to rise. In fact, the number of applications has increased by 3.3% over the past week, with a total of 64.6% of applications being for refinancing.

This uptick in applications is a sign that borrowers are taking advantage of the lower rates to save money on their monthly mortgage payments.

On a similar theme: Lower Mortgage Interest Rates

The average long-term US mortgage rate has dipped for the third week in a row, and it's a welcome relief for homebuyers. Mortgage rates are still more than double what they were in early January.

This dip in mortgage rates is a result of the Federal Reserve's decision to raise its short-term lending rate by 0.75 percentage points, three times its usual margin, for a fourth time this year. The key rate now stands in a range of 3.75% to 4%.

The sharp rise in mortgage rates this year has added hundreds of dollars to monthly home loan payments relative to last year. Last month, sales of previously occupied U.S. homes fell for the ninth consecutive month, hitting the slowest pre-pandemic annual sales pace in more than 10 years.

The 30-year mortgage rate has fallen to 6.49% from 6.58% last week, while the 15-year mortgage rate has edged down to 5.76% from 5.90% last week. A year ago, the average 30-year rate was 3.11%.

The yield on the 10-year Treasury note is still influencing mortgage rates, and it's expected to continue to do so in the coming months. Consumer prices rose last month at the slowest pace in two years, which is a positive sign for mortgage rates.

Additional reading: Mortgage Rates 17 Month Low

The recent dip in US mortgage rates is largely due to a slowdown in inflation, which has been easing since its peak. This is a welcome relief for homebuyers and those looking to refinance their homes.

Consumer prices rose at the slowest pace in two years, according to the Consumer Price Index for October, released on Tuesday. This indicates that the economy is starting to slow down, which is good news for those who have been struggling with high mortgage rates.

The Producer Price Index saw its largest monthly drop since 2020, and retail sales had their first drop in seven months. These signs suggest that the Federal Reserve's restrictive monetary policy is starting to take effect.

The Federal Reserve, which has been hiking its short-term lending rate since March, raised its rate again early this month by 0.75 percentage points. However, Fed Chair Jerome Powell signaled that the Fed may increase its key interest rate by just a half-point at its December meeting.

Recommended read: Mortgage Rates Federal Reserve

The sharp rise in mortgage rates this year has added hundreds of dollars to monthly home loan payments relative to last year. This has created a significant affordability hurdle for many would-be homebuyers, spurring this year's housing market downturn.

Markets rallied Wednesday after Powell's signal, indicating a potential slowdown in rate hikes. This could lead to more stable mortgage rates in the future.

Homebuyers are taking advantage of the recent dip in mortgage rates, with purchase and refinance applications at their highest level in over a month. This is a welcome relief for prospective homebuyers who have faced a challenging year in 2023.

Mortgage rates have likely crested, according to Lawrence Yun, chief economist for the National Association of Realtors. He forecasts that rates will drop to between 6% and 7% by the spring buying season.

Buyers are still sensitive to mortgage rates, but they're seeing some improvements in affordability. Home prices are showing signs of not climbing as fast or even dropping in some areas, making buying less of a stretch for potential buyers.

For another approach, see: Home Buying Decision in a Lock Mortgage Rates

Pent-up housing demand is evident with every gain in affordability, whether it's softening prices or lower mortgage rates. This means buyers will be looking for well-priced, ready-to-move-in homes as the prime spring buying season takes off.

New and existing supply is still low, but lower mortgage rates and slower home-price growth have improved buyers' purchasing power this spring. This is a partial revival in the mortgage market, with the recent decline in mortgage rates boosting borrower demand.

A different take: Mortgage Demand Falls amid Higher Interest Rates