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Last week, the interest rate on the most common type of residential mortgage in the United States experienced its most substantial decline in almost 16 months. This dramatic decrease was propelled by a rally in the Treasury market, leading to a reduction in the benchmark yields that dictate home loan rates.
The Mortgage Bankers Association (MBA) announced on Wednesday that, for the week ending November 3, the average contract rate on a 30-year fixed-rate mortgage slid by a quarter of a percentage point to 7.61%. This new rate marked the lowest seen in approximately a month and represented the most significant weekly rate reduction since late July 2022.
This marks the second consecutive week of declining home-purchasing borrowing costs, a trend that is pushing rates further down from the two-decade highs near 8% observed in October. At that time, the yields on the 10-year Treasury note, which serve as the basis for U.S. home loan rates, were on a continuous upward trajectory.
The trend in yields was abruptly reversed last week following the U.S. Treasury’s announcement that upcoming debt issuance would be somewhat less than initially anticipated. In addition, the Federal Reserve decided to maintain its key overnight policy rate during the November Federal Open Market Committee (FOMC) meeting, adopting a dovish stance.
Joel Kan, the MBA’s Vice President and Deputy Chief Economist, offered insights into the recent rate decrease, explaining that it resulted from a combination of factors, including the U.S. Treasury’s issuance update, the Federal Reserve’s dovish tone in its November FOMC statement, and data indicating a slower job market.
While the MBA’s mortgage market composite index, which gauges mortgage application volumes for both home purchases and refinancing existing loans, increased by 2.5% compared to the previous week, purchase applications rose by 3%. However, they are still approximately 20% lower compared to the same period last year. This suggests that potential buyers are continuing to remain on the sidelines, despite the dip in rates. Meanwhile, sellers with locked-in lower mortgage rates continue to retain their homes, thereby maintaining a tight grip on housing market inventory.
