U.S. mortgage rates see largest drop in over a year

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Last week, the average 30-year rate plummeted by 25 basis points to 7.61%. Factors such as the Federal Reserve’s dovish FOMC statement, indicating a potential halt to its tightening cycle, a sluggish job market, and updates from the U.S. Treasury were key drivers behind this downturn.

The Mortgage Bankers Association’s (MBA) Purchase Index rose by 3% from its lowest levels since 1995. However, new applications decreased by 1% on the week and were down by 22% compared to last year. Joel Kan, the MBA’s chief economist, attributed these changes to updates from the U.S. Treasury, a dovish tone from the Federal Reserve in their November FOMC statement, and slower job market data.

The U.S. key interest rate remained at 5.25% to 5.5% last week as the Federal Reserve hinted at an end to the rate hike cycle, backed by comments from Chair Jerome Powell. The Treasury Department’s announcement of lower than anticipated debt issuance boosted demand for Treasury notes, pushing the 10-year yield to a two-week low.

Benchmark 10-year Treasury note yields reached a high of 5.027% late last month but have since dropped to 4.575%. This decrease puts downward pressure on mortgage rates.

The Intercontinental Exchange (NYSE:ICE) declared the domestic housing market as the most unaffordable since 1984. The scarcity of housing inventory has kept loan applications low, leaving the purchase index more than 20% behind last year’s pace.

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