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

[December 20, 2023]  By Ann Saphir
 
(Reuters) - The interest rate on the most common type of U.S. home mortgage dropped last week to 6.83%, its lowest since June, as the Federal Reserve signaled it is done raising borrowing costs and will turn to cutting them next year.   

A "For Rent, For Sale" sign is seen outside of a home in Washington, U.S., July 7, 2022. REUTERS/Sarah Silbiger/File Photo

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 said on Wednesday.

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

The Fed held interest rates steady last week and Fed Chair Jerome Powell signaled 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% surge in VA refinance applications, according to MBA chief economist Mike Fratantoni.

(Reporting by Ann Saphir; Editing by Chris Reese)

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