Mortgage Rates Dip for a Third Week in a Row
December started on a bright note with a drop in mortgage rates. According to a Freddie Mac report released today, the average rate for a 30-year fixed mortgage fell to 6.49%, while a 15-year fixed home loan dropped to 5.76%. This is a decline for the third consecutive week and the lowest in two months.
This change is likely due to signs from Federal Reserve Board that hint at easing up on short-term hikes.
"Mortgage rates continued to drop this week as optimism grows around the prospect that the Federal Reserve will slow ... rate hikes," said Freddie Mac's chief economist, Sam Khater.
The Fed raised its benchmark rate six times this year to battle inflation, the most aggressive campaign since the 1980s. While Fed rate changes don't directly impact home loan rates, it influences bond investors by signaling the economy's direction.
Investors opt to buy mortgage bonds more when economic data shows easing inflation. When inflation is gaining, however, fixed-asset investors typically demand higher yields to protect their returns, thus, resulting in higher mortgage rates.
Looking Ahead at 2023
The Mortgage Banker's Association forecasted last week that the average rate for a 30-year fixed mortgage likely will peak at 6.7% this quarter but fall to 5.2% in 2023's fourth quarter.