Mortgage rates fall again after Fed chair signals slower interest rate hikes

Mortgage rates fell for the third straight week after the chairman of the Federal Reserve indicated on Wednesday that the U.S. central bank could slow interest rate hikes. 

Mortgage rates have soared in recent months as the Federal Reserve has consistently raised interest rates to slow inflation. The 30-year rate recently peaked above 7 percent, marking a nearly 3 percentage point increase from March when the Fed issued its first in a series of rate increases. 

But the average 30-year fixed mortgage rate dropped to 6.49 percent this week, down from 6.58 percent last week, according to data released Thursday by loan servicer Freddie Mac.  

“Mortgage rates continued to drop this week as optimism grows around the prospect that the Federal Reserve will slow its pace of rate hikes,” Sam Khater, Freddie Mac’s chief economist, said in a statement. 

Federal Reserve Chairman Jerome Powell signaled Wednesday that the U.S. central bank will continue to raise interest rates until it hits its target of 2 percent annual inflation, noting he needs “substantially more evidence to give comfort that inflation is actually declining.” 

“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said in a speech hosted by the Brookings Institution. 

But Powell said the pace of rate hikes could slow as soon as December. 

“We have a risk management balance to strike. We think slowing down at this point is a good way to balance the risks,” Powell said. 

Despite the prospect of slower interest rate increases and slower home price growth, Khater said buyer demand could remain limited. 

“Even as rates decrease and house prices soften, economic uncertainty continues to limit homebuyer demand as we enter the last month of the year.” 

Pending home sales, a forward-looking market indicator, declined for the fifth consecutive month in October, falling by 4.6 percent, according to the National Association of Realtors’s Pending Home Sales Index. The number of pending transactions decreased year-over-year by 37 percent. 

Meanwhile, U.S. home price growth slowed in September, with the S&P CoreLogic Case-Shiller Index falling by 0.8 percent month over month. 

An index that measures price growth in 20 major U.S. metro areas showed a 10.4 percent year-over-year gain, down from 13.1 percent the previous month.   

“As the Federal Reserve continues to move interest rates higher, mortgage financing continues to be more expensive, and housing becomes less affordable,” Craig J. Lazzara, managing director at S&P DJI, said in a statement. “Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to weaken.”