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Halloween is done, scary season is ending, and the horrors of the housing market are getting more gentle — if only a little bit.
Mortgage rates are coming down slightly after a dramatic rise. The government-backed mortgage company Fannie Mae says the interest rate on a 30-year fixed-rate mortgage was down to 6.73% on Thursday. It peaked at more than 8% in mid-October.
Since rates have come down, demand for mortgages is starting to tick higher. It’s a modest increase, as the Mortgage Bankers Association says demand in early November was 12% lower than the same time in 2022.
Borrowing costs for mortgages are at two-decade highs, but prices have continued to rise because so few houses are on the market. That’s put home ownership out of reach for large numbers of people.
The situation has changed because investors are becoming convinced that the Federal Reserve might really be done raising rates. It has raised its benchmark interest rate from near-zero in early 2022 to a range of 5.25% to 5.5% by July, and mortgage rates, along with interest rates on auto loans, credit cards and other financial products, moved higher in tandem.
The gap between typical interest rates and mortgage rates also got unusually large.
While the Fed hasn’t raised interest rates in more than three months, mortgage rates had continued to rise because investors thought the central bank was likely to keep raising them in the future.
But there are signs inflation is continuing to fade, and that the Fed might be satisfied with the progress it’s made in getting price gains under control. That’s let mortgage rates stabilize and start to come down
However, over the longer term, lower mortgage rates might not make houses more affordable, as home prices tend to rise when mortgage rates go down precisely because buyers have an easier time borrowing money.
