Mortgage rates drop as inflation slightly eases

Here is a little good news for the holiday season.

Economic news spelled better news for home buyers who are shopping for a mortgage, even after the Federal Reserve’s latest rate hike.

Mortgage rates continued to dial back as new economic data shows inflation cooling off. Freddie Mac reported last Thursday that the 30-year fixed-rate mortgage averaged 6.31%. Rates have been decreasing ever since hitting a high of 7.08% last month.

Job growth may fuel higher mortgage rates

Mortgage rates remain below 3% for the eighth consecutive week, but economists believe job growth will determine how much longer they'll likely stay so low. The 30-year fixed-rate mortgage averaged 2.87% this week, Freddie Mac reports.

“Job growth seems to be very critical for the following several months as it will indicate when the Fed’s tapering will likely start,” Nadia Evangelou, a senior economist and director of forecasting for the National Association of REALTORS®, writes for the association’s blog. “There is ample talk about the Fed cutting its monthly bond purchases before the end of the year.”

The Fed’s asset purchases have helped keep rates lower than they otherwise would be, Evangelou adds. “Expect mortgage rates to rise further when the Fed will raise interest rates since rising interest rates increase the cost of mortgages,” she notes.