Expectations for Pivot... US Mortgage Rates Fall for 5 Consecutive Weeks

US mortgage rates have fallen for five consecutive weeks amid expectations that the US Federal Reserve (Fed) will cut interest rates sooner than anticipated. Although the peak has passed, rates remain high, and combined with worsening supply shortages, there are forecasts that the US housing market downturn will be prolonged.

Major foreign media outlets, including The Wall Street Journal (WSJ), reported on the 30th of last month (local time) that US mortgage rates fell for five consecutive weeks, reaching their lowest level in over two months. According to Freddie Mac, a US government-sponsored mortgage company, the average 30-year mortgage rate dropped to 7.22% annually from 7.29% the previous week. A year ago, this rate averaged 6.49% annually.

The average 15-year mortgage rate also fell from 6.67% annually the previous week to 6.56% this week. However, this remains high compared to the average rate of 5.67% a year ago. Mortgage rates have declined by more than 0.5 percentage points over the past four weeks, marking the largest four-week drop since the end of last year.

The decline in mortgage rates is due to growing expectations that the Fed will begin cutting rates in the first half of next year. The housing market is the sector most directly affected by the Fed's interest rate policies. GI Shi, an economist at US real estate information company Realtor.com, said, "Despite mixed forecasts on interest rates, market participants believe the Fed's rate hike cycle has ended."

The 30-year mortgage rate, which had surged to the 8% range, has recently continued to decline but is still not low enough to sufficiently warm the frozen housing market. The average 30-year mortgage rate remains higher than last year and is more than double the roughly 3% level seen in 2021.

Sam Khater, Chief Economist at Freddie Mac, said, "Market sentiment changed significantly last month, leading to a sustained decline in mortgage rates. While the current rate trend is encouraging for those looking to buy homes, increased demand amid worsening shortages of existing homes will intensify competition."