According to Mortgage News Daily, the average rate for a 30-year fixed mortgage has dropped to 5.99%. This is the first time it has reached this level since September and was last seen briefly in August. The rate dropped significantly from 6.21% this week, following a statement by Federal Reserve Chairman Jerome Powell indicating a shift in language regarding inflation. As mortgage rates tend to follow the yield on the 10-year Treasury, this change in language caused bond yields to decrease and resulted in the decrease in mortgage rates.
Matthew Graham, the chief operating officer at Mortgage News Daily, indicated that measured steps could continue as long as economic and inflation data supports them. He suggested that rates could fall into the 5% range, but it would take some time and not happen quickly, unlike past rate rallies.
According to Graham, mortgage rates reached their peak in October at 7.37% for the 30-year fixed, and have been decreasing since then. This means that potential homebuyers can save money on their mortgage payments. For example, someone purchasing a $400,000 home with a 20% down payment today would have a monthly payment that is $293 lower than in October.
Lower rates seem to have already sparked an increase in buyer interest.
According to the National Association of Realtors, pending home sales, which track signed contracts on existing homes, increased by 2% in December, marking the first rise in six months. This news has boosted the stocks of homebuilders, with several reaching 52-week highs. The U.S. Home Construction ETF is even reaching a new one-year high, rising by more than 3%. This positive reaction is also due to earnings beats reported by PulteGroup and D.R. Horton, the largest homebuilder in the nation. Both builders reported a resurgence in buyer interest in December, which they attribute to the decrease in mortgage rates.