Record-breaking Plunge: US 30-Year Mortgage Rates Experience Steepest Drop in Almost 16 Months

Record-breaking Plunge: US 30-Year Mortgage Rates Experience Steepest Drop in Almost 16 Months

The interest rate on the most common type of residential mortgage in the United States experienced a significant drop last week, marking the largest decline in almost 16 months. This decrease was driven by a rally in the Treasury market, which caused the benchmark yields used to determine home loan costs to decrease.

According to the Mortgage Bankers Association (MBA), the average contract rate on a 30-year fixed-rate mortgage fell by a quarter percentage point to 7.61% in the week ending on November 3rd. This is the lowest rate seen in approximately a month. The decline in interest rates was the largest weekly drop since late July 2022.

This is the second consecutive week that home-purchasing borrowing costs have decreased, following record-high rates near 8% reached in October. The surge in rates in October was a result of increasing yields on the 10-year Treasury note, which serves as the benchmark for U.S. home loan rates.

However, the trend of rising yields was reversed last week. The U.S. Treasury announced that upcoming debt issuance would be lower than previously anticipated, and the Federal Reserve decided to keep its key overnight policy rate unchanged for the second consecutive meeting. These factors contributed to the decrease in interest rates.

Joel Kan, the MBA’s vice president and deputy chief economist, explained that the decrease in rates was influenced by various factors, including the U.S. Treasury’s issuance update, the Federal Reserve’s dovish stance in the November Federal Open Market Committee (FOMC) statement, and data indicating a slower job market.

In addition to the decline in interest rates, the MBA’s mortgage market composite index, which measures the volume of mortgage applications for both home purchases and refinancings, increased by 2.5% compared to the previous week, reaching 165.9.

While purchase applications rose by 3% on a weekly basis, they remain 20% lower compared to the same period last year. This suggests that potential buyers are still hesitant to enter the market despite the decrease in rates. Sellers who have locked in lower mortgage rates are choosing to hold onto their homes, resulting in limited inventory in the housing market.

This article was reported by Dan Burns and Amina Niasse and edited by Chizu Nomiyama and Andrea Ricci.