A Holiday Gift to Home Buyers: Lower Mortgage Rates

Over the last four weeks, borrowing costs have posted their largest decline since 2008.

If all your buyers want for Christmas is a lower mortgage rate—they may just get it.

The 30-year fixed-rate mortgage averaged 6.33% this week, according to Freddie Mac, dropping for the fourth consecutive week after hitting a high of 7.08%. Mortgage rates are falling due to increasing concerns about lackluster economic growth, says Freddie Mac Chief Economist Sam Khater. “Over the last four weeks, mortgage rates have declined three-quarters of a point—the largest decline since 2008,” he says. “While the decline in the rate has been large, homebuyer sentiment remains low, with no major positive reaction in purchase demand to these lower rates.”

Mortgage rates are still about double what they were a year ago. But as home buyers adjust to higher borrowing costs, they may start shopping again. After all, falling rates are helping on the affordability front.

Housing affordability has increased about 8% over the last four week as mortgage rates move closer to 6%. “If inflation continues to slow down, mortgage rates may stabilize near 6% in 2023,” Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, notes on the Economists’ Outlook blog. “With a 6% mortgage rate, housing will become more affordable for many buyers.” Indeed, the typical family will earn about $1,000 more than the income needed to purchase a mid-priced home if rates stay within the 6% range, Evangelou says.

Freddie Mac reports the following national averages with mortgage rates for the week ending Dec. 8:

  • 30-year fixed-rate mortgages: averaged 6.33%, continuing their fall from last week’s 6.49% average. Last year at this time, 30-year rates averaged 3.10%.
  • 15-year fixed-rate mortgages: averaged 5.67%, dropping from last week’s 5.76% average. A year ago, 15-year rates averaged 2.38%.