US Mortgage Rates End 2023 at Nine-Week Low, Stimulating Hopes for 2024
The US mortgage industry concludes 2023 with a remarkable nine-week consecutive decline in the 30-year fixed-rate mortgages, sinking to the year’s lowest at 6.61%. This significant drop from the previous week’s 6.67% marks a total decrease of 1.18 percentage points since late October, when mortgage rates were at their 22-year peak.
A Reaction to Federal Reserve’s Stand
The downward trend in mortgage rates comes as a response to the Federal Reserve’s aggressive rate hikes aimed at controlling inflation, which began in 2022. During the COVID-19 pandemic, mortgage rates dipped below 3%, but rates escalated as the Federal Reserve started to tackle inflation. However, the Fed has indicated that it might halt rate hikes and potentially reduce them in 2024. This announcement has stirred the bond markets, triggering a significant rally that dropped yields on the 10-year Treasury note, used to determine mortgage rates, to below 4% from a high of 5% in October.
Impact on the Housing Market
Despite the decline in mortgage rates, the housing market hasn’t seen a substantial recovery in sales due to the scarcity of housing inventory, leading to inflated home prices. However, economists expect the drop in mortgage rates to fuel fresh demand for home purchases next year. While the lack of inventory and high prices currently hinder the resale market, this decline in mortgage rates is good news for home buyers, potentially increasing the affordability of the housing market.
Looking Ahead
As we head into 2024, further declines in mortgage rates are predicted, with Fed officials forecasting a median of three rate cuts next year. Industry-watchers are optimistic that the decline in borrowing costs will encourage demand for home purchases. The Federal Reserve’s willingness to consider a cut to its benchmark rate in the new year, if inflation cooperates, could lead to further easing of mortgage burdens for house hunters.
