The frightening season is coming to an end with Halloween, and the horrors of the real estate market are starting to lessen, if not completely disappear.
Following a sharp increase, mortgage rates are starting to decline. As of Thursday, the interest rate on a 30-year fixed-rate mortgage dropped to 6.73%, according to government-sponsored mortgage giant Fannie Mae. Mid-October saw its peak, when it was above 8%.
There is a slight increase in demand for mortgages as a result of the rate decrease. The Mortgage Bankers Association reports that demand was 12% lower in early November 2022 than it was in 2022, so it’s a slight increase.
Mortgage borrowing costs have reached two-decade highs, but because there are so few available homes, prices have continued to climb. That has made owning a home unattainable for many people.
Investors are starting to believe that the Federal Reserve may actually be done raising interest rates, which has changed the situation. It increased its benchmark interest rate from almost zero in the beginning of 2022 to a range of 5.25% to 5.5% by July. Mortgage rates increased in lockstep with those of credit cards, auto loans, and other financial products.
Additionally, the difference between mortgage rates and typical interest rates grew abnormally large.
Mortgage rates had been rising because investors believed the Federal Reserve would likely keep raising rates even though the Fed hasn’t increased interest rates in over three months.
However, there are indications that inflation is abating and that the Fed may be content with the strides it has made in reining in price increases. This allowed mortgage rates to level off and begin to decline.
Lower mortgage rates may not, however, make homes more affordable in the long run, as home prices typically increase in response to lower mortgage rates because it becomes easier for buyers to obtain loans.