Buyers got a small break. Freddie Mac's 30-year fixed mortgage averaged 7.24% this week. That's down from 7.32% last week and 7.4% the week before. Two weeks of declines follow a long run up to the highest rates in almost three years. The break is real. It's also small, and a December Fed hike could take it back.
Here's what the move is worth. We computed it for each $100,000 borrowed on a 30-year fixed loan, principal and interest only. The week's drop, from 7.32% to 7.24%, saves about $5 a month. The two-week drop from 7.4% saves about $11. A year ago the rate was 6.17%, by Freddie Mac's weekly survey. Against that, today's rate costs about $71 a month more per $100,000, or about $850 a year. Scale it to your own loan. Borrow four times as much and every figure is four times as big.
The Journal's Nicholas G. Miller explains the climb. Investors have been bracing for the Fed to lift short-term rates, because the war in Iran pushed inflation up. Mortgage rates track the 10-year Treasury yield. That yield hit its highest level in decades earlier this month and has slipped back since. A selloff in tech stocks helped, as investors moved money into government bonds. The 10-year closed at 4.988% on Thursday, Oct. 29.
Why owners stay put
High rates also keep current owners in place. Someone who locked in a low rate years ago doesn't want to swap it for 7.24%. So fewer homes come up for sale. With supply that tight, prices have kept climbing even as fewer buyers show up. The buyer faces a high rate and a high price at once.
The Fed left its rate alone on Wednesday, Oct. 28, as expected. Most investors still look for a hike in December. If inflation stays high and growth stays strong, more hikes next year are possible. That would make it hard for mortgage rates to fall. Two weeks of relief is not a trend.
Our read
Our read, Housing · M6. A 0.16-point drop over two weeks is worth about $11 a month per $100,000 borrowed, by our math. That's nice. It doesn't change whether you can afford the house. If a payment only works at 7.24% and not at 7.4%, it doesn't work. Buy on the payment you can carry at today's rate, with room for taxes, insurance and repairs. Don't stretch on the hope of a refinance. Nobody knows when that comes, and investors expect the Fed's next move to be up.
The one thing to check this week is your rate lock. If you're under contract, call the lender. Ask when your lock expires. Ask what a float-down costs, too. That's an option to take a lower rate if rates slip again before closing. If you already own, pull your mortgage statement and look at the rate on it. A low rate from years ago is an asset. Moving for a want, rather than a need, trades that asset away at 7.24%. We're glad to run your payment at today's rate with you in a review. You don't sell the umbrella because it stopped raining for two weeks.