Mortgage rates and the 10-year Treasury yield dropped this past week, offering homebuyers brief relief after two months of steady increases. The decline followed a wave of economic data that drove cautious investors into the safety of the bond market.
The latest Freddie Mac Primary Mortgage Market Survey® released Thursday shows the average 30-year fixed-rate mortgage rate at 7.32%, down eight basis points from 7.40%, where it had stalled for the last two weeks. The 30-year FRM is still up year-over-year from 6.19% last year. The 15-year FRM averaged 5.52%, down from 6.71%, last week. A year ago at this time, the 15-year FRM averaged 5.44%.
At presstime, the average rate was still sitting at 7.32% Thursday afternoon, according to Mortgage News Daily.
Because mortgage rates closely track the 10-year Treasury bond, a recent rush toward safe-haven assets has pulled borrowing costs down. A perfect storm of market forces—a tech selloff, Middle East tensions, expectations of a Fed rate pause, and weak housing data—effectively steered investors back into the safety of government bonds.
Realtor.com Senior Economist Anthony Smith commented that while mortgage rates edging down is welcome news, a minor one-week reprieve is hardly a trend reversal.
“The (decline) follows seven straight weeks of increases and, most recently, one week of holding flat at 7.40%,” Smith said in a statement. “Behind it is the 10-year Treasury yield, which averaged roughly 5.13% over the past several days against about 5.24% the week before. Mortgage rates edging down is welcome news, but we should not get carried away. This fall’s surge saw rates climb 74 basis points in just over a month, so this week gives back barely a tenth of that, and the 10-year remains about 40 basis points above its late-August level even after backing off its recent highs.”
Smith said looking forward, the Fed rate picture (like the inflation numbers) has firmed up considerably. Hold odds for next week’s meeting have risen from 42% a month ago to 66% a week ago and around 85% for most of this week, following Fed officials’ comments ahead of the blackout period, he added. “Meanwhile, December hike odds have stayed near 90% the whole time. So the bond market has probably already priced in both a hold next week and a hike in early December,” Smith said. “The question moving forward with the 10-year, and with mortgage rates by extension, is how high the floor is for rates over the next several months and whether we are already there or still have somewhere to go.”
For the housing market, Smith said mortgage rates sitting comfortably above 7% are reshaping the balance between buyers and sellers.
“Rates climbing from 6.66% in late August to 7.40% on October 8 translated into a 7.2% loss of purchasing power for buyers across the board,” he said. “This week’s decline trims that loss, which is relief at the margin. The damage to the fall housing market is already done. Buyers may be gaining power at the negotiating table as the pace of sales slows, but that leverage has come at the expense of affordability.”
To view Freddie Mac’s report, click here.
