Mortgage Rates Fall for Third Straight Week After Democrats’ Midterm Triumph

Mortgage rates retreated to a new one-month low as bond yields softened in the wake of the historic midterm elections in which Democrats reclaimed control of the House and Senate.

The average rate on 30-year fixed home loans drifted to 7.18% for the week ending Nov. 5, down 6 basis points from 7.24% the prior week, according to Freddie Mac. For perspective, rates averaged 6.22% one year ago.

"Mortgage rates continued their downward trajectory this week, improving the environment for prospective homebuyers against a backdrop of strong economic growth," says Sam Khater, Freddie Mac's chief economist.

The downward drift of mortgage rates is partly the byproduct of markets digesting the seismic shift of power in Washington, DC, and looking ahead to Friday’s October jobs report, according to Realtor.com® senior economist Hannah Jones.

Job Openings and Labor Turnover Survey released Tuesday came in stronger than expected, with layoffs down slightly and a significant gain in job openings. That points to a potentially solid monthly employment data. 

For homebuyers, however, a robust expansion of payrolls could be a double-edged sword. 

"While solid hiring supports housing demand over time, a stronger-than-expected report could also lift bond yields and slow the pace of rate declines in the near term," warns Jones. 

A strong labor market will also give the Federal Reserve cover to raise its benchmark rate further, a move the central bank is expected to make next month.

Mortgage rates closely track 10-year Treasury yields. When Treasury prices fall, yields rise, pushing mortgage rates higher, and the reverse is true when bond prices pick up.

Tuesday’s election results suggest Democrats successfully tapped into voter dissatisfaction with the economy under President Donald Trump, helping Democrats flip multiple traditionally red states blue. Yet, Jones says that it is too early to tell whether the shift will be reflected in the housing market. 

"Many newly elected representatives have voiced discontent with the ongoing conflict in the Middle East, which has contributed to rising inflation, so any progress toward resolution could mean lower inflation and softer mortgage rates ahead," she notes. 

Although rates have eased over the last three weeks, they remain above 7%, keeping many buyers on the sidelines. 

October marked another month of a slowing housing market, with both buyers and sellers pulling back. Pending sales fell 10.5% year over year, the steepest decline in three years, as buyers contend with diminished purchasing power. New listings fell 7.5% year over year as sellers held back, discouraged by weak demand. 

Still, sellers aren’t delisting in droves, which suggests they are merely hitting the pause button rather than acting out of distress. 

"With 43% of active listings having had a price reduction, buyers who can afford to participate are in a relatively strong position, facing less competition and more price cuts," concludes Jones. 

How your credit score affects your mortgage

Your credit score plays a role when you apply for a mortgage. A credit score will determine whether you qualify for a mortgage and the interest rate you'll receive. The higher the credit score, the lower the interest rate you'll qualify for.

The credit score you need will vary depending on the type of loan. A score of 620 is a "fair" rating. However, people applying for a Federal Housing Administration loan might be able to get approved with a credit score of 500, which is considered a low score.

Homebuyers with credit scores of 740 or higher are typically considered to be in very good standing and can usually qualify for better rates, which can reduce monthly payments.