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‘Optimism grows’ as mortgage rates post biggest three-week drop since 2008 — but despite this ‘silver lining,’ experts see dark clouds ahead


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‘Optimism grows’ as mortgage rates post biggest three-week drop since 2008 — but despite this ‘silver lining,’ experts see dark clouds ahead

Mortgage rates continued their plunge from a peak of 7.08% in November, marking their biggest three-week drop in 14 years.

“Mortgage rates continued to drop this week as optimism grows around the prospect that the Federal Reserve will slow its pace of rate hikes,” says Freddie Mac chief economist Sam Khater.

That said, mortgage application activity declined once more, as many homebuyers remain priced out of the market and wary of the volatile economy.

“Even as rates decrease and house prices soften, economic uncertainty continues to limit homebuyer demand as we enter the last month of the year,” Khater says.

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Mortgage rates this week

30-year fixed-rate mortgages

The average 30-year fixed-rate mortgage dropped to 6.49%, down from 6.58% the week prior, Freddie Mac reported Thursday. A year ago, the 30-year rate averaged 3.11%.

Mortgage rates began to slide below 7% after the most recent inflation data was released in mid-November. The consumer price index was at 7.7%, coming in below economist’s expectations.

“Data shows that mortgage rates may have peaked. After surpassing the 7% threshold in the second week of November, rates are finally moving down as inflation is cooling,” writes Nadia Evangelou, senior economist for the National Association of Realtors.

Evangelou believes rates may stabilize at 6% if inflation continues to slow.

15-year fixed-rate mortgages

The average 15-year fixed home loan also dipped from 5.90% last week to 5.76% this week. At the same time a year ago, the 15-year rate was at 2.39%.

But while the reprieve in soaring mortgage rates may be “welcome news,” housing costs in 2023 are still expected to remain elevated, warns George Ratiu, manager of economic research at

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“The silver lining is that the inventory of homes for sale continues ramping up, even with sellers taking a step back from the market this fall,” Ratiu adds. “Buyers who are ready can expect more properties to choose from, and a better negotiating position.”

Mortgage giants are raising loan limits in 2023

The Federal Housing Finance Agency (FHFA) announced on Tuesday that Fannie Mae and Freddie Mac will raise the limit of the baseline conforming loan (the highest loan amount for a one-unit property) to $726,200. This is an increase of $79,000 from $647,200 in 2022.

In pricier markets, like San Francisco and New York City, the loan ceiling will hit over $1 million.

Next year’s increases aren’t as high as the ones the government agency implemented in 2022, due to slowing home prices. However, some experts remain concerned.

“Ultimately, such backing feeds the run-up in house prices, exacerbating the affordability challenges we face in today’s supply-constrained marketplace,” the trade association Housing Policy Council said in a statement.

Mortgage applications declined again

Despite the lower rates, mortgage applications fell 0.8% from last week, according to the Mortgage Bankers Association (MBA).

“The economy here and abroad is weakening, which should lead to slower inflation and allow the Fed to slow the pace of rate hikes,” says Joel Kan, vice president and deputy chief economist at the MBA.

“Purchase activity increased slightly after adjusting for the Thanksgiving holiday, but the decline in rates was still not enough to bring back refinance activity.”

Refinance applications plunged another 13% — marking their lowest level since 2000. They were also 86% lower compared to the same week last year.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.


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