US 30-year mortgage rate drops to 6.83%, its lowest since June

THE interest rate on the most common type of US home mortgage dropped last week to 6.83 per cent, its lowest since June, as the Federal Reserve signalled it is done raising borrowing costs and will turn to cutting them next year.

The average contract rate on a 30-year fixed-rate mortgage fell 24 basis points in the week ended Dec 15, the Mortgage Bankers Association (MBA) said on Wednesday (Dec 20).

The rate has not been below 7 per cent since Jul 28, and as recently as late October had risen to nearly 8 per cent, a two-decade high.

The Fed held interest rates steady last week and Fed chair Jerome Powell signalled that, given progress on inflation, the central bank was likely finished with the rate-hike campaign it began in March 2022 and could soon start debating rate cuts.

The remarks set off a sharp decline in the yield on the 10-year Treasury note, used as a benchmark to set home loan costs.

But the drop in the mortgage rate did not immediately translate to a run on homebuying or refinancing; indeed, refinance and purchase applications showed small declines last week, apart from an 18 per cent surge in VA refinance applications, according to MBA chief economist Mike Fratantoni. REUTERS