Percentage blocks going down

Mortgage rates continue to soften, but buyers aren’t responding 

The average rate for a 30-year mortgage was 6.33% this week. It’s now the fourth consecutive week of rate drops.

December 8, 2022
2 minutes

Key points:

  • Despite the lower rates, new mortgage applications have declined.
  • If rates continue to drop, buyers might start to return to the market after the holiday season.

Mortgage interest rates are continuing to drop, but so far it's not luring potential buyers back into the real estate market.

Freddie Mac announced the 30-year fixed-rate mortgage averaged 6.33% this week, dropping for the fourth consecutive week. It has declined three-quarters of a point in that time — the largest drop since 2008, said Sam Khater, Freddie Mac's chief economist — but it's still more than double the rate of a year ago.

"While the decline in rates has been large, homebuyer sentiment remains low with no positive reaction in purchase demand to these lower rates," Khater said.

Though rates have dropped, it doesn't appear it's enough to spur buyers to action. In fact, the number of mortgage applications has actually declined, according to the Mortgage Bankers Association. In its latest survey of applications through Dec. 2, volume was down 1.9% compared to the week before.

The average amount of a 30-year mortgage also declined to $387,300, the lowest level since January 2021.

"The decrease was consistent with slightly stronger government applications and a rapidly cooling home-price environment," said Joel Kan, MBA's vice president and deputy chief economist.

While potential homebuyers aren't buying in yet, there could be a bit of a rebound after the holiday season if rates continue to drop and new listings arrive for the spring homebuying season.

"With a 6% mortgage rate, housing will become more affordable for many buyers," said Nadia Evangelou, NAR senior economist & director of real estate research. "With more buyers back in the market, the housing market may turn around at the beginning of the new year."

The latest mortgage numbers arrived amid a flurry of year-end economic forecasts, but the mortgage rate decline was primarily a response to Wednesday's Federal Reserve statement from Chair Jerome Powell, said Matthew Speakman, Zillow Home Loans senior economist. 

Powell said the Fed has seen signs of inflation cooling, which could mean a slowing of interest rate hikes.

"All told, it was a good week for mortgage rates, but more volatility looms around the corner," Speakman said.

The 15-year fixed-rate mortgage also declined this week, settling in at 5.67%. Last week the rate was at 5.76%.

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