The average rate on 30-year mortgage terms fell 18 basis points Tuesday, putting the fixed rate mortgage at 7.875%.
Despite a huge drop in 30-year mortgage terms, the interest rate on a 15-year fixed-rate mortgage remains steady at 7.625%.
The recent drop in the 30-year mortgage term was caused by a sharp bond market rally after the monthly report from the U.S. Bureau of Labor Statistics noted that the inflation was flat in October from the previous month. Prior to the release of the report, analysts predicted that the inflation rate would gain 0.1% in the month of October, per Reuters.
Mortgage rates have seen a continuous decline from their recent highs. Earlier this month, the average interest rate for 30-year fixed-rate mortgages decreased from 7.86% to 7.61%. Points for loans with a 20% down payment also fell from 0.73 to 0.69. It was the lowest level recorded since the end of September.
Will Mortgage Rates Start Going Down?
It is unclear whether mortgage rates will begin seeing a downtrend. However, Lawrence Yun, chief economist for the National Association of Realtors, said he believes interest rates could fall to 6% next year.
"The interest rate rises should be over, and the Fed will have to consider cutting interest rates seriously. In the meantime, the bond market is reacting as if the Fed will be cutting interest rates next year. Mortgage rates look to head towards 7% in a few months and into the 6% range by the spring of 2024," Yun said, as quoted by CNBC.
What Determines Average Mortgage Rates?
There are a number of factors that affect the average mortgage rates, including the overall economy, inflation, and job growth. Mortgage rates tend to rise when there is an outlook for fast economic growth, higher inflation rates, and low unemployment.
Mortgage rates fell significantly in 2020 during the COVID-19 pandemic due to a recession caused by the government's stay-at-home orders, which resulted in mass layoffs and furloughs. However, mortgage rates began rising again as the economy recovered and unemployment rates fell.
