Freddie Mac’s latest Primary Mortgage Market Survey revealed that mortgage rates rose for the third-consecutive week—something that hasn’t happened since April.
The average 30-year fixed-rate mortgage was 3.78% for the week ending October 31. Mortgage rates averaged 3.75% last week.
“This week marks the third consecutive week of rate increases, which hasn’t happened since April of this year. That said, purchase activity continues to show strength, indicating obvious homebuyer demand,” said Sam Khater, Freddie Mac’s Chief Economist. “However, the lack of housing supply remains a major barrier to not just the housing market, but the overall economic recovery.”
The average rate of the 30-year fixed-rate mortgage last year was 4.83%. The 15-year fixed-rate mortgage rose marginally from 3.18% to 3.19% this week.
“The week’s two big announcements—a 1.9% advance in third quarter gross domestic product and the Fed’s interest rate cut—offered some clarity to investors wrestling with a cloudy outlook. Bond markets reacted to the news by sending mortgage rates higher, to 3.78%,” said George Ratiu, Senior Economist at realtor.com.
The Fed slashed interest rates for the third time in 2019, dropping its benchmark lending rate another quarter of a point. The target range for Federal funds is now 1.5% to 1.75%.
Doug Duncan, Chief Economist with Fannie Mae, said the Fed cited "implications of global developments" as rationale for the cut.
"Lowering rates doesn’t always have the economic impact we think, or expect it to have because it disrupts the natural economic ecosystem," Jarred Kessler, CEO of EasyKnock. "Just look at Japan, it can drive housing growth and a push in the stock market, but other facets of the economy are bound to lose. In the longer term this along with inflation can have a very negative impact."
Ratiu added that cuts to the interest rates provides homebuyers with continued low-cost financing. Favorable mortgage rates, though, are offset by a shrinking housing inventory.
“The number of homes available for sale declined 6.9% this month. Inventory tightened across all price ranges, except for luxury homes, priced above $1 million, with entry-level homes experiencing double-digit contraction,” Ratiu said. “Prices continued rising, clamping a tight vice on affordability, especially for younger, first-time buyers.”