Mortgage rates fall to levels last seen in September

Washington
CNN
 — 

Mortgage rates fell this week as economic data showed inflation is fading.

The 30-year fixed-rate mortgage averaged 6.15% in the week ending January 19, down from 6.33% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.56%.

“As inflation continues to moderate, mortgage rates declined again this week,” said Sam Khater, Freddie Mac’s chief economist.

“Rates are at their lowest level since September of last year, boosting both homebuyer demand and home builder sentiment. Declining rates are providing a much-needed boost to the housing market, but the supply of homes remains a persistent concern,” he added.

Mortgage rates rose throughout most of 2022, spurred by the Federal Reserve’s unprecedented campaign of harsh interest rate hikes to tame soaring inflation. But mortgage rates dropped in November and December, following data that showed inflation may have finally reached its peak.

Last week the Consumer Price Index for December showed that overall prices declined last month by 0.1%. This data signaled to investors that the Federal Reserve’s rate increasing will taper if inflation continues to slow. Mortgage rates are expected to remain volatile until the Fed’s rate hikes end.

The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit. Many buyers who put down less money upfront or have less-than-perfect credit will pay more than the average rate.

The average rate for a fixed-rate mortgage dropped following the 10-year Treasury, which fell from 3.75% at the beginning of the month to 3.37% this week.

The Fed does not set the interest rates borrowers pay on mortgages directly. But its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions.

When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.

“Although the slower inflation rate in December is a positive sign, concerns from businesses and investors about economic growth continue…