For the fifth consecutive week, mortgage borrowing costs have seen a decline, offering a positive outlook for home buyers heading into the holiday season. The 30-year fixed-rate mortgage, which experienced a retreat from its nearly 8% high in October, has now dropped to 7.22%, according to Freddie Mac.

The Chief Economist at Freddie Mac, Sam Khater, notes a significant shift in market sentiment over the past month, contributing to the ongoing reduction in mortgage rates. This trend is seen as encouraging for potential home buyers, as evidenced by the recent uptick in purchase application activity. The current rate trajectory has led to a level of demand comparable to mid-September when rates were similar. The increased demand suggests heightened competition in a market that continues to face challenges due to limited inventory.

The impact of mortgage rates on housing activity is evident, as seen in the October report from the National Association of REALTORS®. During a period when borrowing costs reached a 20-year high, pending home sales hit their lowest level on record. However, with the recent decline in rates, more home buyers are returning to the market. The Mortgage Bankers Association’s latest report indicates a 5% rise in mortgage purchase applications, signaling a potential increase in future homebuying activity.

Jessica Lautz, Deputy Chief Economist at NAR, highlights the shift in mortgage interest rates, noting that the decline since the October peak of 7.79% translates to significant monthly savings for home buyers. For example, on a $400,000 home, the monthly savings amount to $125. Lautz emphasizes the significance of these savings, suggesting that they can be allocated to cover monthly utility bills or commuting costs.

The drop in mortgage rates is expected to provide an added incentive for first-time home buyers to enter the market. Despite the challenge of low housing inventory, they may find more success in multiple-offer situations, especially with the anticipation of even lower mortgage interest rates in the spring.

Freddie Mac’s national averages for the week ending Nov. 30 are as follows:

• 30-year fixed-rate mortgages: averaged 7.22%, down from the previous week’s average of 7.29%. One year ago, the average was 6.49%.
• 15-year fixed-rate mortgages: averaged 6.56%, also a decrease from the previous week’s average of 6.67%. The average one year ago was 5.76%.