Mortgage rates fall below 6 percent for first time since September
The average 30-year fixed mortgage interest rate dropped to 5.99 percent Thursday, falling below 6 percent for the first time since September, according to a key gauge of home loan borrowing costs.
The benchmark home loan rate fell by 0.05 percentage points on Thursday for the third consecutive daily decline, according to the Mortgage News Daily survey of mortgage lenders.
The dip in mortgage rates came despite another interest rate hike from the Federal Reserve on Wednesday, which pushed the central bank’s baseline rate range up by 0.25 percentage points to a span of 4.5 to 4.75 percent. The Fed doesn’t directly set mortgage rates, but the central bank’s rate movements heavily influence borrowing costs across the economy, including for home loans.
While mortgage rates falling after a Fed rate hike may seem counterintuitive, the widely-expected Wednesday hike was the bank’s smallest increase since March 2021 and may be a sign of an eventual pause to increases.
“[The] more moderate rate increase is a clear signal to markets that, while the Fed may need to raise rates somewhat higher this year, it is getting closer to its terminal rate in this rate cycle,” said Marty Green, principal at mortgage law firm Polunsky Beitel Green, in a Wednesday statement.
“As inflationary data continues to show the economy is rapidly slowing, there is growing hope that the Fed might be in a position to pause interest rate hikes in March rather than in May,” he said.
Mortgage rates have fallen somewhat steadily since peaking near 7 percent in November, when the Fed capped off a string of four consecutive rate hikes of 0.75 percentage points that month.
The Fed’s aggressive rate hikes throughout the past year pushed mortgage rates up from lows near 2.8 percent in February 2021, just before the recovery from the COVID-19 recession kicked into gear. The combination of effective COVID-19 vaccines, trillions in federal stimulus and low mortgage rates unleashed a tidal wave of demand for housing, which had been in short supply long before the pandemic.
Higher rates, however, have sapped that momentum from the housing market and led to several monthly declines in home sales. Rates are still 2.33 percentage points higher than in February 2022.
“Despite another drop in mortgage rates, mortgage applications declined last week for the first time in 2023,” said Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), in a Wednesday statement.
“MBA expects mortgage rates to continue a slow descent this year, which, along with slower home-price growth, should lead to increased homebuyer demand as the spring homebuying season gets underway,” he added.
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