Mortgage rates continue downward trend, remain above 7%

Mortgage rates fell again this week, continuing a downward trend that has sparked a recent uptick in demand and fueled hopes that more homeowners will be willing to sell amid an ongoing inventory shortage. Still, affordability struggles remain.

Freddie Mac reported Thursday that the average rate on the benchmark 30-year fixed mortgage fell for the fifth straight week to 7.22%, down from 7.29% last week. At this time a year ago, the 30-year note averaged 6.49%.

The average rate for a 15-year fixed mortgage also declined, dropping to 6.56% from 6.67% the week prior. The 15-year rate averaged 5.67% a year ago.

“Market sentiment has significantly shifted over the last month, leading to a continued decline in mortgage rates,” said Sam Khater, Freddie Mac’s chief economist. 

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“The current trajectory of rates is an encouraging development for potential homebuyers, with purchase application activity recently rising to the same level as mid-September when rates were similar to today’s levels,” Khater continued. “The modest uptick in demand over the last month signals that there will likely be more competition in a market that remains starved for inventory.”

The Mortgage Bankers Association (MBA) reported Wednesday that mortgage applications have climbed for four straight weeks. The decline in rates helped to spur more housing demand, with applications for a mortgage to purchase a home climbing 5% for the week. Still, application volume remains down 19% compared with the same time last year. 

“In addition to helping to improve affordability for homebuyers, a continued decline in mortgage rates could also convince some homeowners to sell, which would increase the low supply of existing homes on the market,” MBA President and CEO Bob Breoksmit said in a statement.

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But many homeowners who are locked in at significantly lower rates than are available today are reluctant to move or unable to afford to do so. Realtor.com reported Thursday that pending home sales fell 1.5% in October to the lowest level since the real estate agency began tracking the data in 2001.

More prospective buyers are now looking to new construction rather than existing homes, as builders can often offer more favorable rate terms, but builders appear to be having some jitters, too.

“While buyers faced limited existing home inventory, especially as mortgage rates climbed in October, new construction activity picked up, offering hope that additional home supply is inbound,” said Realtor.com senior economic research analyst Hannah Jones. 

“However,” Jones added, “as the cost of homeownership remains out of reach for many would-be buyers, homebuilder sentiment fell to the lowest level since December 2022, suggesting builders are concerned about how ongoing affordability headwinds will impact buyer demand.”

FOX Business’ Megan Henney contributed to this report.