Today's Mortgage Rates & Trends - December 2, 2022: Rates plunge

After bobbing the last three weeks between 6.75% and a bit about 7%, the 30-year mortgage average plunged more than a half percentage point Thursday, sinking to 6.50%.

Today's National Mortgage Rate Averages

Thirty-year mortgage rates dropped an eye-popping 52 basis points Thursday, taking the average down to 6.50%. It's the lowest level the flagship indicator has registered since September 16. Compared to the 20-year high average of 7.58% notched in October, today's rates are more than a percentage point lower.

Rates on 15-year loans also declined Thursday, though not quite as dramatically. Giving up 25 basis points, the 15-year average is now at 5.85%, which is 1.18% below its October peak. That reading of 7.03% was the average's highest mark since 2007.

Jumbo 30-year rates meanwhile avoided the drama, remaining flat Thursday. Holding at 5.90%, the Jumbo 30-year average is 37 basis points below its 6.27% reading last month, which was the most expensive Jumbo 30-year level in 12 years.

Thursday's refinancing rates moved very similarly vs. new purchase rates. The 30-year refi average moved 48 basis points lower, the 15-year average decreased 30 points, and Jumbo 30-year refi rates held steady. The cost to refinance with a fixed-rate loan is currently up to 54 basis points more expensive than new purchase rates.

After a historical rate plunge in August 2021, mortgage rates skyrocketed in the first half of this year. Indeed, the 30-year average's mid-June peak of 6.38% was almost 3.5 percentage points above its summer 2021 trough of 2.89%. But the surge this fall dramatically outdid the summer high, with late October's 30-year average reaching 1.2 percentage points higher than the June peak.

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What Causes Mortgage Rates to Rise or Fall?

Mortgage rates are determined by a complex interaction of macroeconomic and industry factors, such as the level and direction of the bond market, including 10-year Treasury yields; the Federal Reserve's current monetary policy, especially as it relates to funding government-backed mortgages; and competition between lenders and across loan types. Because fluctuations can be caused by any number of these at once, it's generally difficult to attribute the change to any one factor.

Macroeconomic factors have kept the mortgage market relatively low for much of this year. In particular, the Federal Reserve has been buying billions of dollars of bonds in response to the pandemic's economic pressures, and it continues to do so. This bond-buying policy (and not the more publicized federal funds rate) is a major influencer on mortgage rates.

Since June, the Fed has been reducing its balance sheet. Identical sizable reductions occurred monthly through the summer and were accelerated in September. This is on top of its plan to reduce new bond purchases by an increment every month, the so-called taper, which began in November.

The Fed's rate and policy committee, called the Federal Open Market Committee (FOMC), meets every six to eight weeks. Their next scheduled meeting takes place December 13-14.

Methodology

The national averages cited above were calculated based on the lowest rate offered by more than 200 of the country's top lenders, assuming a loan-to-value ratio (LTV) of 80% and an applicant with a FICO credit score in the 700–760 range. The resulting rates are representative of what customers should expect to see when receiving actual quotes from lenders based on their qualifications, which may vary from advertised teaser rates.

For our map of the best state rates, the lowest rate currently offered by a surveyed lender in that state is listed, assuming the same parameters of an 80% LTV and a credit score between 700–760.