30-Year Mortgage Rate Falls to 7.32%, First Weekly Drop in Two Months, as Home Purchase Applications Fall 7%

The average 30-year fixed mortgage rate fell to 7.32% this week from 7.40%, Freddie Mac reported Thursday, Oct. 22. It is the first weekly decline since the week ending Aug. 20 and the biggest one-week drop since July.

The 15-year rate eased to 6.68% from 6.71%.

Demand did not follow. The Mortgage Bankers Association said purchase applications fell 7% in the latest weekly survey and sit 18% below a year ago. Total application volume dropped 5.3%.

The rate is still far above where it started

The 30-year rate was 5.98% the week before the Iran war began. It has since spiked as bond yields and oil prices rose, and it was 6.3% a year ago.

This week's drop follows seven straight weekly increases and a week at 7.4%, the highest in roughly 35 months. Even at 7.32%, the rate is above where it stood at the end of every week since Thanksgiving 2023 except one.

The MBA's own contract rate for conforming loans of $832,750 or less fell to 7.41% from 7.50%. Points dropped to 0.75 from 0.83 on loans with a 20% down payment.

Other gauges came in slightly different. Mortgage News Daily put the 30-year at 7.32% on Oct. 22. NerdWallet, using Zillow data, put the 30-year APR at 7.26% for the week ending Oct. 22.

Demand and sales keep sliding

MBA economist Joel Kan said rates declined for the first time in over two months, yet both purchase and refinance applications kept falling. Refinance applications dropped 2%, a smaller decline than in some earlier weeks. They remain 59% below a year ago.

Kan said buyers respond more to the overall level of rates than to weekly moves. The adjustable-rate share of applications held at 10.5%, with ARM rates almost a full percentage point under the 30-year fixed.

MBA President Bob Broeksmit said elevated rates and affordability pressures "keep many prospective buyers on the sidelines."

The National Association of Realtors' pending home sales index fell 7.3% in September to 66.0, the lowest reading since the series began in 2001. Economists had expected a 0.5% decline. Pending sales were down 11.3% from a year earlier.

The drop hit every region: the West fell 9.2%, the South 8.2%, the Midwest 6.5% and the Northeast 4.2%. NAR chief economist Lawrence Yun blamed "fast-rising" mortgage rates. He noted that they "have already risen much more" than the Federal Reserve's own rate hikes.

Builders are pulling back

The Commerce Department reported September housing starts down 5.2% to an annualized 1.221 million, against economist expectations of about 1.3 million. Starts were 7.4% below a year earlier.

Single-family starts fell 4.6% to 859,000, the lowest in a year. Multifamily starts dropped 6.7% to 362,000, down 24.9% from a year ago. Total permits slipped 0.2% to 1.400 million.

Builder confidence in the National Association of Home Builders and Wells Fargo survey fell to its lowest level in 14 years.

There is also a lock-in problem. In the second quarter, 49.1% of outstanding mortgages carried rates of 4% or lower. Owners with those loans have little reason to sell and take on a 7%-plus loan.

Too little, too late?

One reading is that rates could keep drifting lower. The 10-year Treasury yield dipped below 5% Thursday morning, which Real Estate News said makes further easing in mortgage rates likely in coming days.

Realtor.com senior economist Anthony Smith argued it will not matter for the season. "The damage to the fall housing market is already done," Smith said. "Buyers may be gaining power at the negotiating table as the pace of sales slows, but that leverage has come at the expense of affordability."

Mortgage News Daily COO Matthew Graham cautioned against leaning on oil prices as a guide. Rate moves this week appeared to track oil, he said, but that correlation has been "highly unreliable" for more than a month.

Zillow's forecast, released Oct. 7, has the 30-year rate at 7.1% by the end of this year and 6.5% by the end of 2027.

What Washington is doing

President Trump signed an executive order Thursday directing Federal Housing Finance Agency Director Bill Pulte to create a pilot program that cancels borrowers' mortgage insurance premiums once they meet equity requirements. The order also directs Pulte to turn the FHFA's title insurance waiver pilot into a permanent program offering "cost-friendly alternatives" to title insurance.

Those measures trim closing and carrying costs. They are aimed at housing and mortgage costs rather than the rate itself.

On Oct. 7, the Department of Housing and Urban Development announced a Next Generation Manufactured Housing Action Plan aimed at lower-cost manufactured homes.

The Fed meets next week

The Fed raised its benchmark rate a quarter point in September to a range of 3.75% to 4%. It was the first hike in more than three years. Minutes released Oct. 7 show officials expect another increase before year-end.

The FOMC meets Oct. 27-28. The CME Group's FedWatch tool puts the odds of a hold at 95%. It also shows nearly a 75% chance of some hike at the December meeting.

Next Thursday's Freddie Mac reading will be the first test of whether this week's dip holds once the Fed has spoken.