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Freddie Mac Mortgage Rates Pullback But Remain High
By Leslie Cook MONEY RESEARCH COLLECTIVE
Mortgage rates slipped this week as uncertainty continues to cloud the economic outlook. The average rate on a 30-year fixed-rate mortgage decreased to 6.66% for the week ending October 6, according to Freddie Mac’s weekly survey. Last week the average rate was 6.7%. Today’s modest decrease breaks a six-week upward streak that saw rates increase…
Mortgage rates slipped this week as uncertainty continues to cloud the economic outlook.
The average rate on a 30-year fixed-rate mortgage decreased to 6.66% for the week ending October 6, according to Freddie Mac’s weekly survey. Last week the average rate was 6.7%. Today’s modest decrease breaks a six-week upward streak that saw rates increase by more than 1.5 percentage points.
Potential homebuyers are facing very different conditions this year compared to 2020 and 2021. Mortgage rates have more than doubled since the first week of January and are the highest they’ve been since 2007.
Despite today’s slight pullback, “rates remain quite high compared to just one year ago, meaning housing continues to be more expensive for potential homebuyers,” said Freddie Mac chief economist Sam Khater in a press release.
Mortgage payments on a median-priced home are up by 50% since this time last year. That’s cutting into borrowers’ buying power, with many buyers settling for smaller homes or opting out of the market altogether.
Other loan types also saw movement this week. The average rate on a 15-year fixed-rate mortgage decreased by 0.06 percentage points to 5.90%, while the rate on a 5/1 adjustable-rate mortgage moved up 0.06 percentage points to 5.36%.
Mortgage rates falter on mixed economic news
New signs of an economic slowdown helped nudge rates lower this week. Market observers are hoping that sluggish economic news may cause policymakers at the Federal Reserve to slow the pace of interest rate increases.
“Markets are swiveling between the Fed’s current restrictive rate policy rhetoric and the potential for a Fed ‘pivot,’ where hikes to the target funds rate would be less severe in the event of slowing economic activity,” said Paul Thomas, vice president of Zillow Home Loans, in a statement. Looking ahead, he said, upcoming inflation data will likely determine how mortgage rates move in the near future.
In an effort to slow inflation, the Fed has increased the federal funds rate five times this year. That benchmark rate is now 3.25% from near zero at the start of the year. Inflation has run above 8% since March, a level not seen in four decades. The Fed’s mandate is to target inflation around 2%.
Meanwhile, the Bureau of Labor Statistics reported on Tuesday more than 1 million fewer job openings in August than had been expected, a sign that the Fed’s policies may be having their desired cooling effect on the economy.
In times of economic uncertainty, investors look to safe haven vehicles such as treasury notes. Mortgage rates are often tied to the yield on the 10-year Treasury — if yields increase, mortgage rates increase, typically averaging 1.8 percentage points higher than the yield. As a result of the sluggish economic news, the yield on the 10-year Treasury fell early this week, causing mortgage rates to fall as well.
However, there are still signs that the economy may not be slowing as quickly as the Fed may want. On Wednesday, however, payroll services company ADP reported that the economy added 208,000 jobs in September, above market expectations.
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Leslie Cook is the Lead Mortgage Reporter covering real estate and mortgages for Money. She started out over 30 years ago as a business reporter with Caribbean Business newspaper in San Juan, Puerto Rico, covering computers, and human resources. Her work has also appeared in Reuters and she graduated Cum Laude from Bryn Mawr College in Pennsylvania with a bacheloru2019s degree in history.