Potential homebuyers are getting an early holiday gift as mortgage rates dropped to six-week lows ahead of the December Federal Reserve meeting.
The 30-year fixed-rate mortgage averaged 6.69% this week, according to the latest Freddie Mac survey. That’s down from last week’s 6.81% and is the lowest level since late October.
Where rates go next may depend on how the Federal Reserve views the economy. The committee is scheduled to meet Dec. 17-18 to determine if another interest rate cut is warranted. They will get a chance to see several economic reports — including the jobs report due out on Friday — before making a decision.
It’s worth noting that the Fed’s previous two cuts this fall did not appear to make a dent in mortgage rates, which are up 60 basis points since the board’s September rate cut.
Applications up, but many buyers are still sidelined
Consumers appear to be responding to declining rates with an end-of-year uptick in activity. Mortgage applications rose 2.8% for the week, according to the Mortgage Bankers Association. The seasonally adjusted purchase index was up 6% from the previous week and is at its highest level since January.
“The recent strength in purchase activity continues, supported by lower rates and higher inventory levels, which are giving prospective buyers more options compared to earlier in the year,” said Joel Kan, MBA’s deputy chief economist.
Who are these late-season buyers? Most likely, they are individuals with relatively high incomes who feel secure in their financial and employment situations, said Lisa Sturtevant, chief economist at Bright MLS.
“Affordability is still a major constraint for moderate-income buyers. With home prices expected to rise and rates projected to remain in the 6’s through 2025, many of those buyers will still be priced out,” Sturtevant said.
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Author: Dave Gallagher
