(Reuters) - The average interest rate on the most popular U.S. home loan dropped to its lowest level since September as more evidence inflation is past its peak sent Treasury yields lower, data from the Mortgage Bankers Association (MBA) showed on Wednesday.
The average contract rate on a 30-year fixed-rate mortgage fell by 19 basis points to 6.23% for the week ended Jan. 13. Financial markets have been buoyed by a string of recent data that shows high inflation is slowing, allowing the Federal Reserve to scale back its hefty interest rate hikes and plan a stopping point this spring.
The yield on the 10-year note acts as a benchmark for mortgage rates.
Mortgage rates soared to more than 7% last October as the U.S. central bank raised its benchmark policy rate in 2022 at the fastest pace in 40 years. The interest-rate sensitive housing sector has borne the brunt of the Fed's actions, with mortgage rates still almost double where they were one year ago.
The respite on mortgage rates attracted more buyers. The MBA's Market Composite Index, a measure of mortgage loan application volume, rose 27.9% from a week earlier, the biggest jump since March 2020.
The central bank is expected to slow its pace of rate hikes to a quarter percentage point increase when it next meets on Jan. 31- Feb. 1 after lifting its policy rate by 50 basis points in December.