Mortgage rates dropped for the third week in a row, providing some wiggle room for budget-conscious homebuyers.
More softening may be on the way, with some experts predicting that rates may have already peaked this year.
The average rate on the 30-year fixed mortgage fell to 7.44% from 7.50% the previous week, according to Freddie Mac on Thursday. Still, rates have held steadily above 7% for three months, a stretch not seen in 22 years.
Read more: Mortgage rates at 20-year high: Is 2023 a good time to buy a house?
The move in rates came after a government report this week showing inflation came in lower than expected in October. While Federal Reserve Chair Jerome Powell didn’t rule out the possibility of another rate hike in December, the Fed’s commitment to remain data dependent gave traders and housing experts some hope.
“Recent incoming data, such as that from this week, is making a rate hike far less likely,” Jiayi Xu, Realtor.com economist, said in a statement. “Mortgage rates are likely to continue dropping, as they have in recent weeks.”
Elevated rates have been a blow for homebuyers’ affordability in recent weeks, keeping homeowners from listing and home prices out of reach for some. Still, the worst of rates may be behind us, said one expert.
Read more: How to buy a house in 2023
“I certainly hope so,” Daryl Fairweather, chief economist at Redfin, told Yahoo Finance Live (video above) when asked if rates were done rising. “Anything could happen with new data prints. Hopefully we continue to get more good news about inflation cooling, and that continues to be good news for mortgages.”
‘A slow recovery’
Mortgage demand for purchases hit its highest level in five weeks as mortgage rates edged lower last week, according to the Mortgage Bankers Association (MBA), but a full recovery is still far.
The volume of purchase applications increased 3% on a seasonally adjusted basis for the week ending Nov. 10, MBA data showed, but remained 12% lower compared to the same week a year earlier.
Rates moved lower last week after a weaker than expected monthly jobs report solidified the Fed’s decision to hold its benchmark interest rate between 5.25% and 5.5% — where it’s remained since July. That marked the second consecutive meeting where Fed officials chose to hold rates steady, following 15 rate hikes.
But rates are just part of the equation, as many buyers on the hunt for a home also have to deal with scarce inventory levels that are keeping home prices high.
“It’s not going to be a major turn of events. We may just see a few more people decide that now is the time to make a move and lock in a rate, but mortgage rates are still substantially higher than they were last year,” Fairweather said. “Sales are still down, so it’s going to be a slow recovery.”
According to Realtor.com, elevated rates have pushed homebuyers nationwide to offer larger down payments to reduce the size of their mortgage loans.
Read more: Types of mortgage loans: Buying a house in 2023
The average down payment was 14.7% of the sales price in the third quarter — a high — according to Realtor.com. The median down payment amount equaled $30,000.
“Despite mortgage rates trending below the 8% ceiling, they remain nearly multi-decade highs,” said Xu. “…An unexpected consequence of this heightened rate environment is the surge in down payments, climbing to a new peak in the third quarter of 2023.”
Gabriella is a personal finance and housing reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.
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Source: finance.yahoo.com