The average 30-year-fixed rate mortgage dropped to 3.09% during the week ending Nov. 4, down from 3.14% the week prior, according to the latest Freddie Mac PMMS Mortgage Survey. A year ago, the 30-year fixed-rate mortgage averaged 2.78%.
Most economists believe mortgage rates will climb following as the Federal Reserve tightens monetary policy. The central bank’s Federal Open Markets Committee announced on Wednesday that it will begin to taper its monthly asset purchases starting in November.
“While mortgage rates fell after several weeks on the rise, we expect future upticks due to stronger economic data and as the Federal Reserve pulls back on its stimulus,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Mortgage rates tend to move in concert with the 10-year Treasury yield, which reached 2% yesterday, after five weeks below the 2% level. The 15-year-fixed-rate mortgage averaged 2.35% last week, down from 2.37% the week prior. A year ago at this time, it averaged 2.32%.
The tapering will begin soon thanks to economic “substantial further progress,” according to the central bank. It will reduce the pace of its $120 billion in monthly purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities.
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“Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation,” the Fed said. “Risks to the economic outlook remain.”
Later this month, the Federal Reserve will purchase at least $70 billion Treasury securities and at least $35 billion agency mortgage-backed securities.
Rising mortgage rates have already begun to sap demand. Mortgage application activity dropped 3.3% for the week ending Oct. 29, according to the most recent Mortgage Bankers Association (MBA) survey. The Refinance Index decreased 4% in one week, while the Purchase Index dropped 3% in the same period.
Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, said that mortgage rates decreased for the first time since August due to concerns about supply-chain bottlenecks, waning consumer confidence, weaker economic growth, and rising inflation.
