Thirty-year mortgage rates remain under 7%

Mortgage rates rose slightly this week, but the average 30-year fixed remains under 7%, according to Bankrate’s national survey.

The average rate on 30year fixed mortgages ticked up to 6.9% this week, a small increase from 6.88% the previous week, according to Bankrate’s weekly national survey of large lenders.

Just three months ago, the average rate on 30-year home loans topped 8%.

The latest drop in mortgage rates comes after the Federal Reserve indicated it’d begin cutting its key rate in 2024. The central bank’s long-awaited pivot was spurred by a number of factors, including a slowing job market and signs that the Fed’s ongoing war on inflation is working.

Meanwhile, yields on 10year Treasury bonds, an informal benchmark for 30year mortgage rates, have dropped from 5% to less than 4% in recent weeks.

The Fed doesn’t directly control mortgage rates, but it plays a pivotal role. The central bank sets policy that affects the cost of home loans. At the conclusion of its most recent meeting on Dec. 13, the Federal Open Markets Committee decided to leave rates unchanged.

“Slower inflation and financial markets anticipating the potential end of the Fed’s hiking cycle are both behind the recent decline in rates,” says Joel Kan, deputy chief economist at the Mortgage Bankers Association.

The rate cool-off somewhat eases the housing affordability squeeze. It also bodes well for a housing market that has been sluggish since 2022.

“These lower rates will bring both active buyers and sellers into the market, eager to get out ahead of the traditionally busier spring market,” says Lisa Sturtevant, chief economist at Bright MLS, a listing service in the Mid-Atlantic region.

What happened to mortgage rates this week

The 30-year fixed mortgages in this week’s survey had an average total of 0.29 discount and origination points. Discount points are a way for you to reduce their mortgage rate, while origination points are fees a lender charges to create, review and process your loan.

Over the past 52 weeks, the benchmark 30-year fixed-rate mortgage averaged 6.99%. A year ago, the 30-year fixed-rate mortgage was 6.74%. Four weeks ago, that rate was 7.41%. The 30year fixed-rate average for this week is 0.63 percentage points higher than the 52week low of 6.27%.

As for other types of loans:

• The 15-year fixed-rate mortgage was 6.18%, down from 6.21% from a week ago.

• The 5/6 adjustablerate mortgage (ARM) was 6.95%, unchanged from a week ago.

• The 30-year fixedrate jumbo mortgage was 6.93%, also unchanged from a week ago.

How mortgage rates affect home affordability

The national median family income for 2023 is $96,300, according to the U.S. Department of Housing and Urban Development, and the median price of an existing home sold in November 2023 was $387,600, according to the National Association of Realtors. Based on a 20% down payment and a mortgage rate of 6.9%, the monthly payment of $2,042 amounts to 25% of the typical family’s monthly income.