Economic Report: ‘Good news for the housing market’: Mortgage rates edge downwards, providing relief to potential buyers

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The numbers: Mortgage rates continue to inch downwards, providing some relief to prospective homeowners.

The 30-year fixed-rate mortgage averaged 6.31% as of Dec. 15, according to data released by Freddie Mac FMCC, +0.54% on Thursday. 

That’s down 2 basis points from the previous week — one basis point is equal to one hundredth of a percentage point. 

Last week, the 30-year was at 6.33%. Last year, the 30-year was averaging at 3.12%

Rates are lower than they were a month ago, when the 30-year was averaging above 7%.

The average rate on the 15-year mortgage fell to 5.54%.

“Mortgage rates continued their downward trajectory this week, as softer inflation data and a modest shift in the Federal Reserve’s monetary policy reverberated through the economy,” Sam Khater, chief economist at Freddie Mac, said in a statement.

On Wednesday, the central bank raised its benchmark interest rate by 50 basis points to address persistent inflation in the U.S. economy. The Fed raised rates by 75 basis points four times since June.

(The Fed’s moves do not directly affect the mortgage rates. Instead, the yield on the 10-year Treasury note is more closely related to mortgage rates.)

“The good news for the housing market is that recent declines in rates have led to a stabilization in purchase demand,” Khater added. “The bad news is that demand remains very weak in the face of affordability hurdles that are still quite high.”

What are they saying? Expect rates to keep going down, one industry group said.

The Mortgage Bankers Association (MBA) said in a statement that they expect “the recent downward trend in mortgage rates to continue.”

The MBA is also forecasting the rate on the 30-year fixed-rate mortgage to drop further next year, and end 2023 at 5.2%.

The yield on the 10-year Treasury note TMUBMUSD10Y, 3.488% dropped to 3.45% during the afternoon trading session on Thursday.

Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at aarthi@marketwatch.com

This article was originally published by Marketwatch.com. Read the original article here.

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