National average rates have declined by 50 basis points* over the last two weeks for 30-year, fixed-rate mortgages. According to Freddie Mac, rates dropped by 3 basis points this week, to 6.58%. Rates dropped by 47 basis points last week, one of the largest declines in decades, and are down from an annual peak of 7.08%, which was registered two weeks ago. The mortgage rate for the same week one year ago was 3.10%. The decline comes after positive inflation data was released this month showing the 12-month inflation rate was 7.7% in October, down from 8.2% in September.

The Federal Reserve has been working to battle the highest inflation in decades and has raised the Federal Funds Rate six times thus far in 2022, including four consecutive 75 basis point increases, with the most recent occurring earlier this month. Though mortgage rates are more closely tied to 10-year Treasury yields than the Federal Funds Rate, factors such as high inflation – and the actions that the Federal Reserve takes to combat it – weigh on economic confidence, causing fluctuations in yields and therefore mortgage rates.

In addition, the Federal Reserve will meet again in December, and markets will be watching its moves and statements closely. Recent retail spending data, as well as December’s employment and inflation data will play a role in what, if any, actions are undertaken to raise rates further or take a wait-and-see approach. These actions will influence economic confidence moving into the new year.

Some seasoned mortgage lenders have reacted to the current mortgage rate conditions by establishing favorable portfolio programs that can produce rates as low as 5%, as well as offering rate buy-down and Adjustable-Rate Mortgage (ARM) options. Some sellers have also adjusted to the current market by offering programs contributing to rate buy-downs. While the high-level national mortgage rate averages remain elevated and volatile, some promising options are developing for buyers.

*A basis point is equal to one-hundredth of one percent (0.01%).
**30-Year, Fixed-Rate Mortgage
Source: federalreserve.gov, Freddie Mac, Smith Schnider Research, The Wall Street Journal