This week witnessed another drop in mortgage rates, igniting a surge in potential homebuyers submitting applications as the 2024 buying season nears its end. The average 30-year mortgage rate plummeted from 6.81% a week earlier to 6.69%, as per Freddie Mac data. Simultaneously, 15-year mortgage rates dipped to an average of 5.96% from 6.1% the previous week.

The Impact of Rate Drop on Homebuyers

Sam Khater, Freddie Mac's chief economist, emphasized in a statement that despite a modest decline in rates, consumers have responded positively, with purchase demand noticeably improving. This responsiveness of prospective homebuyers to even small rate changes highlights the persistent affordability headwinds. Mortgage applications for home purchases witnessed a 6% increase in the week through Friday, marking the fourth consecutive week of gains. This week also included an adjustment for the Thanksgiving holiday.Joel Kan, MBA's vice president and deputy chief economist, stated that the recent strength in purchase activity is sustained by lower rates and higher inventory levels. This provides prospective buyers with more options compared to earlier in the year.

Rate Trends and Treasury Yields

The latest decrease in mortgage rates mirrors a dip in Treasury yields that underpin them. In recent days, yields have fallen as financial markets assess President-elect Donald Trump's final Cabinet appointments to gain insights into his administration's priorities.

Fed's Rate Decision and Market Outlook

Friday's jobs data will offer another clue about where mortgage rates are headed before the end of the year. Traders anticipate a 70% chance of the Federal Reserve lowering benchmark interest rates by 25 basis points at its mid-December meeting, as per CME FedWatch. However, if the labor market shows unexpectedly strong results, the odds of another cut could decrease, potentially leading to higher mortgage rates.Claire Boston, a senior reporter for Yahoo Finance, covers housing, mortgages, and home insurance. Click here for real estate and housing market news, reports, and analysis to guide your investing decisions. Read the latest financial and business news from Yahoo Finance.