Mortgage rates fell below 7% this week after breaching that threshold last week for the first time since April 2002.
The drop comes a day after Federal Reserve Chair Jerome Powell said the central bank's monetary tightening policies are impacting demand in the most interest-rate-sensitive sectors of the economy, such as housing.
On Wednesday the Fed raised its short-term lending rate by another 0.75 percentage points, three times its usual margin, for a fourth time this year. Its key rate now stands in a range of 3.75% to 4%, with more increases likely on the horizon.
The 30-year fixed-rate mortgage averaged 6.95% with an average 0.8 point as of Nov. 3, down from last week when it averaged 7.08%, mortgage securitizer Freddie Mac said. A year ago at this time, the 30-year FRM averaged 3.09 percent.
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%.
Lastly 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%.
REAL ESTATE EXPERTS EXPLAIN HOW TO NAVIGATE THE MARKET
"Mortgage rates continue to hover around seven percent, 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 continued, "Yesterday’s interest rate hike by the Federal Reserve will certainly inject additional lead into the heels of the housing market."
"We still have some ways to go," Fed Chair Jerome Powell said Wednesday, suggesting that more recent data suggest that officials might have to raise rates higher than the 4.6% they forecast in September if inflation continues to persist.
Consumer prices remained stubbornly high at 6.2% year-over-year in September, the same as the previous month.
Rising mortgage rates, combined with sky-high home prices, have crushed homebuyers’ purchasing power by adding hundreds of dollars to monthly mortgage payments.
Sales of existing homes have declined for eight straight months as borrowing costs have become too high a hurdle for many Americans already paying more for food, gas and other necessities. Meanwhile, some homeowners have held off putting their homes on the market because they don’t want to jump into a higher rate on their next mortgage.
While mortgage rates don’t necessarily mirror the Fed’s rate increases, they tend to track the yield on the 10-year Treasury note. The yield is influenced by a variety of factors, including investors’ expectations for future inflation and global demand for U.S. Treasurys.
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