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By Giulia Carbonaro
Senior Reporter
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Mortgage credit availability expanded in October as rates fell for several consecutive weeks, offering a glimmer of relief to U.S. homebuyers grappling with high home prices and elevated borrowing costs.
The Mortgage Bankers Association (MBA) reported on Tuesday that mortgage credit availability increased in October after two months of declines. The association’s Mortgage Credit Availability Index (MCAI) rose by 0.4 percent to 107.5 last month, indicating that lenders are offering a wider range of mortgage products and that borrowing requirements have eased marginally.
The increase was driven partly by greater availability of jumbo loans and adjustable-rate mortgages (ARMs), giving some borrowers more financing options. The MBA said lenders had expanded their ARM offerings, including products allowing cash-out refinancing for borrowers with lower loan-to-value ratios.
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This alone does not mean that homes have become more affordable or that mortgage qualification has become easier for every borrower. But combined with falling mortgage rates in recent weeks, it suggests housing affordability is gradually improving while qualified borrowers have a slightly wider range of financing options.
The MBA said the average rate on a 30-year fixed mortgage, the most popular home loan among U.S. borrowers, fell for the fourth consecutive week to 7.21 percent in the week ending November 6. Freddie Mac, the government-backed mortgage finance company, separately reported that the average 30-year fixed-rate mortgage fell to 7.18 percent in the week ending November 5, marking a third consecutive weekly decline.
While not exactly a low rate by historical standards, it marked a sharp drop from the average of 7.40 percent reached in the weeks ending October 8 and October 15, according to Freddie Mac; the highest level since November 2023.
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What’s Driving Rates Down?
Housing affordability, a major issue during the midterms, slightly improved after the election. Jeff DerGurahian, loanDepot's chief investment officer and head economist, said the midterms "helped set the tone for markets" last week, contributing to the decline in rates.
“Stocks sold off on election night before going on a roller-coaster ride as investors weighed what the results could mean for AI data-center regulation and investment,” he said in a statement shared with Newsweek on Monday. “A massive rebound later unraveled as investors grew more concerned that a slowdown in the sector could weaken one of the economy’s biggest engines of growth,” he added.
“That put the market back into a more traditional pattern, with investors moving money out of stocks and into Treasuries, and the added demand pushing Treasury yields lower and helping support mortgage rates, even after a stronger-than-expected employment report.”
Despite last week’s stronger-than-expected jobs report, investors are looking past the latest data and focusing more on where the economy may be headed, DerGurahian believes. “Consumers are borrowing more, saving less and feeling stretched by higher everyday costs, raising questions about the outlook for economic growth,” he said.
The recent decline in oil prices has helped relieve some inflation pressure, with prices at the pump falling across the country in recent days. If prices continue falling, there is a chance that mortgage rates might decline further, DerGurahian said.
“For the bond market, which influences mortgage rates, the sweet spot may be oil prices falling enough to cool inflation, but not so much that consumers have significantly more money to spend elsewhere.”
How Higher Mortgage Rates Have Impacted Housing Affordability
Higher mortgage rates and elevated home prices have sharply raised the cost of buying a home in the U.S. in recent years, keeping buyers on the sidelines of the market and bringing down home sales.
The impact is evident in the latest Realtor.com data, which shows that both buyers and sellers pulled back in the month of October. Pending sales—a forward-looking indicator of housing market activity—fell 10.5 percent year over year, marking the steepest decline in three years. Sellers have also started pulling back, with new listings falling 7.5 percent year over year last month as inventory grows and demand remains weak.
According to a new Realtor.com study released Wednesday, the average U.S. mortgage holder would need about $1,100 more each month in principal and interest payments to buy a median-priced home at a 7.32 percent rate.
The estimated payment would then climb from $1,332 to $2,468, an 85.3 percent increase that translates to a 15.6 percentage-point rise in the share of income the typical U.S. household spends on housing.
“Home sales have been stuck for several years, and this research helps illuminate one of the major friction points for today's homeowners who might like to move,” Realtor.com chief economist Danielle Hale said in a press release.
“Lower rates would help, but even at 6 percent, the typical payment would still be more than 60 percent higher. For many families, that is money they simply don’t have to spare.”
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Why Lower Rates Are Good News for Homebuyers
For buyers who can afford a home, current market conditions are increasingly favorable.
According to Realtor.com senior economist Hannah Jones, 20.5 percent of active U.S. home listings had a price reduction in October, suggesting that “buyers who can afford to participate are in a relatively strong position, facing less competition and more price cuts,” she said in a statement shared with Newsweek.
DerGurahian described rates around 7.18 percent as “a welcome improvement” from the peaks reached last month, but warned that rates “may not be low enough to bring a large number of buyers back into the market.”
While some of the slowdown in homebuying is seasonal, he argued, “affordability remains a hurdle, with rates still above the 6.5 percent range seen during the heart of the purchase season.”
Will Rates Continue Falling?
Rates could fall further if inflation is kept at bay, according to experts, though they will not fall much lower than they are now.
“Mortgage rates may have room to move into the high 6 percent range, but the market will need calmer conditions, continued strength in bonds and more evidence that inflation is easing,” DerGurahian said.
Futures markets are pricing in a 25-basis-point increase at the Federal Reserve’s December 8–9 meeting, with another increase also expected at its late-January meeting, Reuters reported this week.
Higher interest rates could undermine the recent improvement in mortgage borrowing costs. Although the Federal Reserve does not directly set mortgage rates, expectations of tighter monetary policy can push Treasury yields higher, putting upward pressure on mortgage rates.
The outlook has become more uncertain after October inflation exceeded expectations, prompting Federal Reserve officials to consider a larger interest rate increase in December.
Although the Fed does not directly set mortgage rates, further interest rate increases could push borrowing costs higher, potentially reversing some of the recent relief for homebuyers.
Newsweek’s reporters and editors used Martyn, our AI assistant, to produce this story. Learn more about Martyn here.
Contact Newsweek editors on this story: Tobias Meyjes and Rhian Morgan.
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