Housing News

Mortgage Rates Fall for the First Time in Eight Weeks, Offering Homebuyers a Break

Mortgage interest rates fell to 7.32% this week, giving homebuyers their first weekly decline after seven consecutive weeks of increases followed by a week of holding steady.

The average rate on a 30-year, fixed-rate mortgage dropped from 7.40% the previous week for the week ending Oct. 22, according to Freddie Mac. A year ago, the average rate was 6.19%.

The lower rates are “offering some relief to prospective homebuyers,” said Sam Khater, Freddie Mac’s chief economist, in a statement.

Rates on 15-year fixed mortgages also declined, falling to 6.68% from 6.71% the previous week.

The drop follows a decline in the 10-year U.S. Treasury (bond) yield, which influences mortgage rates. The yield averaged roughly 5.13% over the past several days, compared with 5.24% the previous week.

Although borrowing costs remain elevated, homebuyers may be finding more opportunities to negotiate as the fall housing market shifts in their favor.

Realtor.com’s latest Market Clock report found that roughly two-thirds of the nation’s 100 largest metropolitan areas either favor buyers or are moving in that direction.

However, the improvement in rates has yet to translate into stronger mortgage demand.

Total mortgage applications declined 5.3% for the week ending Oct. 16, according to the Mortgage Bankers Association (MBA). Applications to purchase homes fell 7% from the previous week and were 18% below the same period a year earlier.

Refinance applications also fell 2% from the previous week.

For homebuyers looking for a lower initial interest rate, adjustable-rate mortgages, or ARMs, may offer another option.

These loans typically offer a lower interest rate for the first years of the mortgage and then adjust to current rates, up to a certain cap. The lower initial rate can mean smaller monthly payments at the start of the loan, although payments may increase when the rate adjusts.

MBA reported that the average rate on a 5/1 ARM fell to 6.46% from 6.54% the previous week. That was nearly a full percentage point below the MBA’s 7.41% average for 30-year fixed mortgages.

ARMs accounted for 10.5% of mortgage applications during the week, according to the MBA.