The rise in mortgage rates to more than 7% earlier this year had a significant impact on the housing market, causing it to come to a sudden halt. However, recent reports from the Mortgage Bankers Association (MBA) indicate that rates are now dropping and are well below the 7% mark. The decrease in mortgage rates is being attributed to a number of factors, including a decrease in demand for home loans. According to the MBA, mortgage applications decreased by 2% in the week leading up to Thanksgiving, despite rates continuing to trend lower. This decrease in demand for home loans has caused lenders to become more competitive in order to attract borrowers. In order to make their loans more attractive, lenders have been offering lower rates.

Another factor contributing to the decrease in mortgage rates is the increased demand for mortgage-backed securities by investors. These securities are created when lenders pool together a group of mortgages and sell them as a package to investors. The increased demand for these securities has helped bring down rates, as investors are willing to pay more for them when rates are lower. The MBA reports that investors began buying up mortgage-backed securities recently, locking in the 7% rate and helping to bring down rates overall.

In addition to the decrease in demand for home loans and the increase in demand for mortgage-backed securities, there is also currently more money available for mortgage loans. This increase in available funds has helped to ease rates even further. Finally, the yield on the Treasury's 10-year bond has decreased over the past six weeks, which also impacts mortgage rates. The lower the yield on this bond, the lower mortgage rates can go. The MBA reports that the yield on the 10-year bond has decreased from its recent high of 4.3% to about 3.5%.

Overall, it remains to be seen how low mortgage rates will go and how long they will stay at these low levels. Experts have different predictions for what rates will be in 2023, with some forecasting rates as low as 5.5%-6% if the Federal Reserve is able to bring inflation under control. However, it is worth noting that the average mortgage rate is still about 3% higher than it was at this time last year. It is possible that rates could continue to fluctuate in the coming months and years as various economic factors continue to impact the housing market. Despite the recent drop in rates, potential homebuyers may still be wondering if rates will drop enough to make homes more affordable. Only time will tell how the market will continue to evolve and what the future holds for mortgage rates.