Housing News

Mortgage Rates Fall to Lowest Point in Weeks

Mortgage interest rates fell for the second straight week. Rates reached their lowest level since the start of October, offering homebuyers welcome relief after a steep climb earlier this fall.

The average rate on a 30-year fixed mortgage dropped to 7.24% for the week ending Oct. 29, down from 7.32% the previous week, according to Freddie Mac. A year ago, the average rate was 6.17%.

The lower rates are “modestly boosting purchasing power for prospective buyers,” said Sam Khater, Freddie Mac’s chief economist, in a statement.

The latest decline comes as stock market volatility has sent investors looking for safer investments, including U.S. Treasury bonds. Mortgage interest rates are tied closely to 10-year Treasury bonds.

The improvement in borrowing costs appears to be giving mortgage demand a modest boost.

Total mortgage applications increased 3.4% for the week ending Oct. 23, according to the Mortgage Bankers Association (MBA). Applications to purchase homes rose 4% from the previous week, while refinance applications increased 3%.

“The decline in rates gave borrowers some relief, with applications rebounding slightly,” said Joel Kan, MBA’s vice president and deputy chief economist, in a statement.

Despite the weekly improvement, purchase applications remained 18% below the same period a year earlier, while refinance applications were down 61%.

More homebuyers are also turning to adjustable-rate mortgages (ARMs) to reduce their initial borrowing costs. ARMs can offer lower initial monthly payments, but their interest rates and payments may change after the introductory fixed-rate period.

ARMs accounted for 11.3% of mortgage applications, the highest share in more than a year, according to the MBA.

The average rate on a 5/1 ARM fell to 6.41%, compared with 7.37% for a 30-year fixed mortgage in the MBA survey.

Meanwhile, the U.S. Federal Reserve held its benchmark interest rate steady at its October meeting.

Expectations of another rate increase in December could put upward pressure on mortgage rates, depending on what upcoming inflation and employment reports reveal.