Mortgage rates fell to a record low of 7% for the first time since August as the U.S. economy is showing signs of cooling down. It is the seventh consecutive week that rates have dropped, following the Federal Reserve’s decision to keep the rates stable for the year.
With the Fed signaling in its most recent meeting that rate cuts may be expected in 2024, mortgage rates are expected to continue falling. According to data released by Freddie Mac(FMCC) on Thursday, the 30-year fixed-rate mortgage averaged 6.95% from 7.03% last week, as of December 14.
The seventh rate decrease comes as a relief for home loan borrowers, who saw rates average around 8% at the end of October. Cooling inflation in recent months is the primary factor of falling rates, which has given rise to expectations in financial markets that the Federal Reserve will soon begin to lower rates.
These expectations were reassured on Wednesday when the Fed signaled that they don’t expect to raise the interest rates anymore, and will cut it next year.
As the mortgage rates continue to fall, there has been spurring activity in the housing market, which was almost paralyzed due to high mortgage rates combined with high prices, making typical homes unaffordable to the general public.
Sam Khater, Chief Economist of Freddie Mac, said in a press release- “Given inflation continues to decelerate and the Federal Reserve Board’s current expectations that they will lower the federal funds target rate next year, we likely will see a gradual thawing of the housing market in the new year,"
What are they saying? "We often talk about how lower mortgage rates will bring more buyers into the market. But in this very unusual market, where inventory has been locked down, it is more important to watch how falling rates influence prospective sellers' decisions," said Lisa Sturtevant, chief economist at Bright MLS,
She added, "A homeowner with a sub-three percent mortgage is very reluctant to sell if it means they have to take out a loan with a rate that is more than double."