With mortgage rate averages falling for the third straight week and more borrowers entering the market, the outlook for the housing market appears to be improving.
As of Thursday, the 30-year, fixed-rate mortgage sat at a weekly average of 6.6%, according to mortgage giant Freddie Mac. That’s lower than the previous week and a decrease from the same time last year when rates averaged 6.95%.
But daily measures of those borrowing costs, considered more volatile than weekly averages, showed a slight increase.
As of Thursday afternoon, the 30-year, fixed-rate mortgage had inched up to 6.80%, Mortgage News Daily data showed. Translated into a dollar amount, that means that if a homebuyer took out a $250,000 mortgage Thursday, they’d have a monthly payment of roughly $1,630.
From the Homes.com blog: What Is a 30-Year Fixed Mortgage and How Can I Qualify?
At the same time, the 15-year, fixed-rate mortgage weekly average had also decreased as of Thursday, the Freddie Mac survey said. At 5.84%, it was lower than the previous week’s average and less than the average of 6.38% from the same time a year earlier.
On a daily basis, that rate had eased slightly from a day earlier to 6.05%, according to Mortgage News Daily.
"The combination of mortgage rate declines, firm consumer income growth and a bullish stock market have increased homebuyer demand in recent weeks," Sam Khater, Freddie Mac's chief economist, said in a statement Thursday. "While the outlook for the housing market is improving, the improvement is limited given that homebuyers continue to face stiff affordability headwinds.”
Rates 'yo-yo'
All told, this week’s data shows just how sensitive the mortgage market is to data about the economy. For example, daily measures of mortgage rates showed shifts on Wednesday in response to updated data about inflation and a Bank of Canada policy announcement that had implications for the U.S. bond market, according to Matthew Graham, chief operating officer of Mortgage News Daily.
The data is also indicative of another mortgage market reality: There likely won’t be any drastic changes in mortgage rates anytime soon. While rates have been declining, there have yet to be any empathic changes, some lending professionals said in a survey from personal finance website Bankrate.
Sean Salter, an associate professor of finance at Middle Tennessee State University, for example, said he expects “rates to yo-yo in a tight range” until there’s more clarity on the economy.
Melissa Cohn, regional vice president of William Raveis Mortgage, predicted that “with such a mixed bag of news it will take a report that is far from market expectations” to truly disrupt mortgage rates.
Even so, the minimal changes in the market have been enough to bring some borrowers back into the mortgage market already.
The Mortgage Bankers Association said its Market Composite Index, a measure of mortgage loan application volume, increased 5.4% during the week that ended Dec. 6. That was driven by a big uptick in refinance activity that jumped 27% on a weekly basis and 42% on a yearly basis.
“Homeowners are acting on the recent downtick in mortgage rates by refinancing, and prospective buyers have been more active,” Bob Broeksmit, the industry group’s president and CEO, said in a statement.
Applications to purchase a home have also remained strong, increasing every week except for one in the past three months, according to Joel Kan, MBA’s vice president and deputy chief economist. That demand has been supported by “sustained housing demand and inventory that continues to gradually grow in many markets,” he said.