Mortgage Rates Fall Below 7% | CNN Business

Mortgage rates fell this week after surpassing 7% for the first time in 20 years.

According to Freddie Mac, the average 30-year fixed-rate mortgage rate was 6.95% for the week ending November 3, down from 7.08% the week before. A year ago, the 30-year fixed rate was 3.09%.

Mortgage rates have hovered around 7%, cooling the once-overheated housing market significantly, according to Sam Cater, chief economist at Freddie Mac.

30-year fixed rates have been rising almost every week since late August and have more than doubled year-to-date.

The rapid rise was fueled by the Federal Reserve’s unprecedented campaign of interest rate hikes to curb surging inflation. A combination of central bank rate hikes, investor fears of a recession and mixed economic news have made mortgage rates increasingly volatile over the past few months.

of The Fed announced yesterday It will raise the benchmark rate by another 75 basis points, making it the sixth rate hike this year and the fourth in a row of that magnitude.

“Yesterday’s rate hike by the Federal Reserve will certainly inject additional lead into the bottom of the housing market,” Cater said.

He said demand has dwindled as some potential buyers try to navigate the unpredictability while others remain on the sidelines due to ineligibility for loans. Added.

Following Wednesday’s Fed meeting, Chairman Jerome Powell said: “soft landing” The period of economic cooling without a recession has shrunk, but it is still possible.

“The inflation situation has become more difficult this year,” he said. “This means policies need to be more restrictive, which narrows the path to a soft landing.”

The Federal Reserve does not directly set the rate borrowers pay on mortgages, but its actions affect them. is in When investors see or anticipate rate hikes, yields move higher and mortgage rates move higher.

Realtor.com economic research manager George Latiou said yields on both 2-year and 10-year Treasuries were higher following Wednesday’s announcement, suggesting capital markets could head into recession in 2023. He said that it shows that he sees the possibility of .

“With inflation still at a 40-year high and the Fed expecting several more rate hikes to counteract it, mortgage rates will come under upward pressure through the end of 2022.” said Ratiu.

Lawrence Yun, chief economist at the National Association of Realtors, said interest rates had fallen over the past week as yesterday’s Fed announcement was already priced into the mortgage market. However, inflation has yet to reach the levels the Fed wants, and interest rates are expected to remain volatile.

“Mortgage rates are at 20-year highs, and that’s hurting homebuyers,” Yun said. “If inflation is contained, mortgage rates will start to come down. It may take him another year or two before that happens.”

As interest rates rise, homeownership is becoming increasingly out of reach for people who can’t get a mortgage or don’t even qualify for a mortgage.

With mortgage rates about 4% higher than last year, the median homebuyer expects their monthly mortgage payment to be $1,000 higher, according to Realtor.com.

“This dramatic rise in financing costs has effectively reduced most buyers’ budgets,” said Ratiu.

It’s not just mortgage rates that have risen since last year, home prices have also risen significantly.

Based on September 2021 median home prices and fixed 30-year mortgage rates, the typical homebuyer could have expected $1,296 a month, assuming a 20% down payment, according to Realtor.com. prize. With price increases and mortgage rates hovering around his 7% this year, the typical buyer faces a monthly payment of $2,296.

For this year’s buyers to receive the same monthly payments as last year, the median home price would have to drop 45% to about $235,000.

Prices haven’t fallen that much, but they’re slowly starting to fall in some areas.

“Most homes are priced based on comparable properties sold in the last six months, not taking into account today’s much higher rates and the inability of buyers to buy.” said Ratiu. “With household incomes lagging inflation and borrowing costs still rising, we expect transactions to continue to decline and prices to continue to fall.”

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