Mortgage rates hit lowest point since September

Mortgage rates moved down significantly this past week to their lowest level since mid-September, as the markets reacted positively to the latest inflation news, Freddie Mac reported.

Its Primary Mortgage Market Survey for the week of Jan. 19 found the average for the 30-year fixed rate mortgage fell to 6.15%, a drop of 18 basis points from the prior week's 6.33%. That is the lowest it has been since the week of Sept. 15, 2022, when it crossed back above the 6% mark.

For the same period last year, the 30-year FRM was 3.56%.

The 15-year FRM fell to 5.28%, down 24 basis points from the prior week's 5.52% but still above 2.79% one year ago.

"Rates are at their lowest level since September of last year, boosting both homebuyer demand and homebuilder sentiment," Sam Khater, Freddie Mac chief economist, said in a press release. "Declining rates are providing a much-needed boost to the housing market, but the supply of homes remains a persistent concern."

The National Association of Home Builder/Wells Fargo Housing Market Index rose for the first time in January since December 2021.

However, a potential stand-off in Congress on the nation's debt ceiling could push mortgage rates higher again, said a statement from Orphe Divounguy, senior macroeconomist at Zillow Home Loans, issued Wednesday night.

"The closer we get to the brink, the higher the risk of default," said a statement from Orphe Divounguy, senior macroeconomist at Zillow Home Loans, issued Wednesday night. "This could raise borrowing costs, including mortgage rates, thus hampering an already cold housing market."

That's what happened the last time such a conflict took place, back in 2011. "Stock prices plunged, market volatility spiked, and mortgage rates increased as America's credit rating was downgraded for the first time," Divounguy noted. "A fight over raising the debt ceiling is likely to drag into the summer, and mortgage borrowers should expect rate volatility as a result."

Zillow's own rate tracker had a 10 basis point week-to-week decline in the 30-year FRM as of Thursday morning, to 5.78%.

So far, speculation about the debt ceiling has had limited impact on the 10-year Treasury yield, one of the benchmarks used to help price mortgages.

On Jan. 11, the 10-year yield closed at 3.554%. It bounced around the next few days, ending up 3.535% on Jan. 17. But the following day, it plummeted to 3.375%. By noon eastern time on Thursday, the yield increased by just 2 basis points to 3.395%.