Interest rates for mortgages, which reached their highest point in more than two decades this past October, have experienced a downward trend for the past several weeks, a promising sign for aspiring homebuyers looking to purchase early this year.
Despite mortgage rates and prices for homes last month lingering above values measured at the end of 2022, analysts expect the decline will motivate more buyers to enter the housing market in 2024.
According to the government-sponsored mortgage financing company Freddie Mac, the rate to acquire a 30-year, fixed-rate mortgage in the country averaged at 6.61% on Thursday, December 28, a 0.06 percent decrease from the previous week and a decrease of just over half a percentage point compared to four weeks prior.
The year ended with the 30-year mortgage rate nearly two tenths of a percentage point higher than the rate calculated at the end of 2022. However, the rate adjusted by its smallest margin in six weeks, with the weekly average not having seen a change of 0.06% since the week of Nov. 9 to Nov. 16.
“The rapid descent of mortgage rates over the last two months stabilized a bit this week, but rates continue to trend down,” said chief economist at Freddie Mac Sam Khater about the Dec. 28 averages. “Heading into the new year, the economy remains on firm ground with solid growth, a tight labor market, decelerating inflation and a nascent rebound in the housing market.”
Prospective buyers appear to have responded to the fall in mortgage rates positively.
A December report from real estate company Redfin states that the number of submitted mortgage applications has increased 19% since the beginning of November, when the total had reached its lowest point in roughly 30 years. The report also suggests that interest rates are likely to remain below 7% as the new year progresses.
“The last week of economic news and data makes it more likely than not that mortgage rates have peaked,” said economic research lead at Redfin, Chen Zhao, about the report. “Buyers will return from the holidays with more homes to choose from, and they should still see rates in the mid-6% range.”
Still, mortgage rates could rise again this year. Although unlikely, Zhao said the Federal Reserve may choose to reverse the direction of interest rates as a cautionary measure at some point in 2024, depending on the state of inflation in the country.
The 30-year rate increased slightly to 6.62% this week, per Freddie Mac, bringing a halt to consistent downward progress in the first week of the new year.