Financial markets are giving a gift of less-costly home financing this year, with 30-year fixed-rate mortgage rates retreating considerably after late October highs. What you might not realize is that it is roughly the same gift potential borrowers got last year, when mortgage rates hit a late October/early November peak, then went on a downward trend that trimmed 81 basis points off of the top rate by the time Christmas rolled around. So far this year? A 76 basis point decline from the recent peak has already taken place.
Of course, this good news only extends to the trend for rates, but not their level. Last year's decline saw rates fall to around the 6.25% mark, while the most recent decline still leaves them hanging around 7% so far. Still, lower rates are of course welcome, and potential borrowers are glad to see them again.
Recent declines in mortgage rates continue to bring some folks back in to the market. As reported by the Mortgage Bankers Association, overall requests for mortgage credit rose by 2.8% in the week ending December 1, making it five straight weeks of increases, a remarkable feat in the kind of interest rate climate in place this year. However, it wasn't purchase-money mortgage applications that drove the headline number higher; they declined by 0.3%. No, it was a 13.9% increase in requests to refinance existing mortgages, as at least some homeowners looked to extract equity from their homes after stepping out of the mortgage market during Thanksgiving week. If they can persist, lower mortgage rates this holiday season may be the gift that keeps on giving, at least until even better refinancing and financing opportunities arise at some future point in time. But will they... and when?
We'll likely not find out with any kind of precision this week and are more likely to get no real indication at all. The Fed has maintained that rates are expected to be "higher for longer", an outlook they first began to allude to in perhaps the middle point of this year. The last hike in short-term rates came back in late July, so it's not even been five months for the current level of policy yet, a time that probably doesn't yet qualify as "long", let alone "longer". As well, and certainly more recently, the Fed's general stance is that it wants to see more data to ascertain whether policy is in the proper position to achieve its inflation goals, and that it can be patient in adjusting policy. We presume this patience extends to the downside for rates as well as the upside.
By late Friday, the yield on the influential 10-year Treasury had climbed off its intra-week low, so it would appear that mortgage rates may be a little firmer in the early part of the week at least. After that, what the Consumer Price Index for November shows regarding inflation and what the Fed indicates about the path for policy will kick them more strongly in one direction or the other. We'll expect those particular influences to come too late to change things for this week and expect to see a mild increase of perhaps a few basis points in the average offered rate for a conforming 30-year fixed-rate mortgage as reported by Freddie Mac. Like investors, we'll reassess our expectations after the Fed has its say.