Mortgage Rates Update
The mortgage rates fever seems to have finally broken—at least for now. After rising to 7.79% in October—the 2023 high—rates floated down notably over November amid signs of receding inflation pressures, finishing the month at 7.29%, according to the latest weekly data from Freddie Mac.
While this trend bodes well for a sagging housing market, still-high rates and home prices continue to create challenging conditions for buyers and sellers, hampering mortgage application activity.
Current Mortgage Rates for November 2023
| Loan Type | Rate |
|---|---|
| 30-year fixed | 7.21% |
| 15-year fixed | 6.75% |
| 30-year jumbo | 7.32% |
| 5/1 ARM | 5.96% |
Fed Pauses Rate Hikes Again: What This Means for Mortgage Rates
In a widely expected move, the Federal Open Market Committee (FOMC) voted to leave the benchmark federal funds rate unchanged after its latest two-day policy meeting on November 1. The federal funds rate, which serves as the overnight borrowing rate for commercial banks and credit unions, indirectly influences mortgage rates.
This marks the second consecutive meeting where the Fed opted not to increase rates following a 25 basis-point hike in June, elevating the rate range to between 5.25% and 5.5%. A basis point is equivalent to one-hundredth of one percentage point.
Over the past year and a half, mortgage rates have surged to their highest levels in decades due to the Fed’s aggressive actions aimed at curbing inflation, which have, in turn, impacted the housing market.
Although the headline inflation reading in October remained flat at 3.2%, signaling that the Fed’s efforts are cooling prices, the central bank remains steadfast in its commitment to the 2% target.
However, the question arises: do two consecutive pauses indicate that the Fed is finally done with rate increases?
“I expect the Fed to keep the option for an additional future rate hike on the table, even if the odds it will need to exercise that option are low,” said Danielle Hale, chief economist at Realtor.com, in an emailed statement.
On the other hand, despite the Fed’s reiterated intention to maintain a restrictive policy stance for the time being, Matt Vernon, head of retail lending at Bank of America, anticipates rate cuts in the future.
“The Fed’s likely decision to cut rates in 2024 would be a key factor that could breathe new life into the housing market,” Vernon says. “As interest rates decrease, we anticipate a positive impact on housing activity.”
What policymakers have in store for 2024 could become clearer when the FOMC meets next on December 12-13 for its final two-day meeting of the year.