Largest Reduction In Mortgage Rates In 41 Years

The biggest week-over-week drop in mortgage rates since November 1981 occurred this week, when they fell by almost a half percent.

Freddie Mac, which this week altered its method of calculating rates, reported that the rate on the typical 30-year fixed mortgage decreased to 6.61% from 7.08% the week before. The decrease comes after a 10-year Treasury yield sharply dropped last week after government data revealed that inflation had slowed down in the previous month.

The sudden drop in price provided some relief to still-active homebuyers and sellers who were under pressure from high prices, which increased activity in the otherwise slow market.

“According to Adriana Perezchica, president of Via Real Estate, “the difference in demand was significant; the drop in rates encouraged buyers to rush and try to lock rates this weekend. “Up until recently, buyer demand had been declining as borrowers struggled to keep up with rising mortgage rates and home prices. How long this rate decline will last is unknown. and customers are rushing to lock in a rate.”

Additionally, Freddie Mac’s updated methodology, which now gathers real-time rates based on loan applications submitted to its automated underwriting system, makes its debut with this week’s results. The average difference between the old and new methods is less than 10 basis points.

Buyers Rush To Secure In Lower Rates:

In response to falling rates, buyers hurried to lock in lower prices. According to the most recent application survey by the Mortgage Bankers Association, demand for mortgages increased last week as the number of purchase applications rose by 4%.

On the same day that the government released new inflation data that were weaker than anticipated, Freddie Mac reported that the average 30-year mortgage had surpassed 7%. This led to a more than 32 basis point decline in the yield on the 10-year Treasury, which fixed mortgage rates typically follow, to 3.816%, well below its recent average of 4%.

This week, the 10-year Treasury bonds lost more ground, dropping to 3.716% on Wednesday.

Mortgage rates changed in a way that was closely related to the 10-year Treasury’s collapse last week. Indeed, according to Jeffrey Ruben, president of WSFS Mortgage, “it was the single largest daily reduction in mortgage rates that I can remember in over 20 years,” he told Yahoo Money last week. “In just one day, the 30-year fixed rate mortgage dropped from just over 7% to 6.5%.”

Perezchica claims that the rate decline increased the purchasing power of one of her clients, increasing the borrower’s pre-approved mortgage budget from $430,000 to $490,000.

“In just one day, the mortgage rate for my client dropped from 8.2% to 6.5%. That is significant, per Perezchica. The same buyer won’t have to settle for a home that is either further away or smaller because they will be able to afford a home in a neighborhood close to the city.

Even so, rising home prices and ongoing inflationary pressures continue to fuel concerns about housing affordability, particularly given that historically low rates are still fresh in buyers’ minds. For instance, the number of purchase applications is still 46% lower than it was when interest rates were 3.10 percent.

According to George Ratiu, manager of economic research at, “Buyers may hesitate to move forward with transactions if they find the erratic nature of current mortgage rates unsettling.” Some buyers might prefer to hold off to see if interest rates fall even further. The mortgage market is still in trouble, though, as inflation is still above 7%.

Home Sellers Remain Cautious:

The drop in demand is discouraging for sellers. In a Fannie Mae survey, 59% of respondents said now is a good time to sell, down from 59% in September to 51% in October.

Home builders are similarly pessimistic about the market, with confidence in the industry falling for the 11th consecutive month, according to the National Association of Home Builders.

Home sellers are gradually adjusting their price expectations to encourage buyers to enter the market.

The share of homes with a price reduction was 20.9% in October, up from 10.6% a year ago. In November, 37% of builders reduced their prices, up from 26% in September, with a 6% average price reduction. Builders are also offering buyers buy points and buy-downs.

It might not be enough for some buyers on a tight budget.

“Higher rates and higher home prices have hampered home sales. “Even with the rate drop, some buyers I’ve spoken with have expressed concern about a possible recession and their ability to afford a monthly mortgage payment in the near future.” They’re not sure if this is the right time to buy.”

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