US Mortgage Rate Decline to Sub-7% Provides Little Home Buyer Relief

In the week ending November 3, mortgage rates fell for the second time in eleven weeks. 30-year fixed mortgage rates declined by 13 basis points to 6.95%. In the week prior, 30-year fixed rates increased by 14 basis points to 7.09%.

Following the latest decline, rates are up 196 basis points from the August 3 most recent low of 4.99%. 30-year fixed rates were up 386 basis points year-over-year.

Economic Data from the Week

It was a busy week on the economic calendar, with US economic indicators and the Fed in the spotlight.

The US JOLTs job openings and ADP Nonfarm Employment change figures suggested more wriggle room for the Fed to front-load rate hikes. In contrast, survey-based data painted a gloomier picture, easing bets of a 75-basis point Fed rate hike in December.

While the stats influence, the Fed policy decision on Wednesday caught the markets off-guard. In line with expectations, the Fed delivered a 75-basis point rate hike. However, Fed Chair Powell poured cold water on bets of a Fed pivot, saying that the ‘ultimate level of interest rates will be higher than previously expected.’

Powell also stated that it was ‘premature’ to talk about taking the foot off the gas.

Freddie Mac Rates

The weekly average rates for new mortgages, as of November 3, 2022, were quoted by Freddie Mac to be:

• 30-year fixed rates decreased by 13 basis points to 6.95%. This time last year, rates stood at 3.09%. The average fee remained unchanged at 0.8 points.

• 15-year fixed rates fell by seven basis points to 6.29%. Rates were up by 394 basis points from 2.35% a year ago. The average fee decreased from 1.4 points to 1.2 points.

• 5-year fixed rates slipped by one basis point to 5.95%. Rates were up by 341 basis points from 2.55% a year ago. The average fee fell from 0.3 points to 0.2 points.

According to Freddie Mac,

• Housing market conditions continued to deteriorate as mortgage rates hovered at around 7%.
• Buying demand continues to weigh, with uncertainty leaving buyers on the sidelines as affordability challenges linger.
• Wednesday’s Fed rate hike added further pressure on the housing market as buyers struggle with mortgage rates at current levels.

Mortgage Bankers’ Association Rates

For the week ending October 28, 2022, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances decreased from 7.16% to 7.06%. Points fell from 0.88 to 0.73 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA declined from 6.79% to 6.70%. Points decreased from 1.59 to 1.18 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 6.53% to 6.55%. Points rose from 0.68 to 0.70 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, a measure of mortgage loan application volume, increased by 1% in the week ending October 28. The Index decreased by 1.7% in the week prior.

The Refinance Index increased by 0.2% and was 85% lower than the same week one year ago. In the previous week, the Index increased by 0.1%.

The refinance share of mortgage activity increased from 28.2% to 28.6%.

According to the MBA,

• Mortgage applications fell for a sixth week in a row, despite a fall in rates.
• The 30-year fixed rate declined for the first time in over two months but remained around its highest level since 2002.
• Elevated rates continue to pressure buying and refinance activity.
• The impact of higher rates is evidenced in the downward trend in housing starts and home sales.

For the week ahead

US consumer inflation expectation numbers will draw interest ahead of wholesale inflation figures on Tuesday. However, retail sales will likely impact yields and mortgage rates the most.

Following last week’s US Jobs Report, the numbers would have to impress to nudge mortgage rates back to 7%. December Fed pivot bets linger despite Fed Chair Powell’s hawkish FOMC press conference on Wednesday.