The Dramatic drop-in Mortgage Interest Rates in December and Its Impact on the Mortgage Industry. 

Interest Rates Drop

As we end 2023, the housing market has experienced a significant surge due to a sudden drop in mortgage interest rates. This unexpected decrease has ignited a fire in the mortgage markets.

This week marked a significant decrease in borrowing costs for 30-year fixed-rate mortgages, falling below 7% for the first time in four months, as reported by Freddie Mac, the housing-finance giant, on Thursday. A mere six weeks ago, the average rate for these home loans reached a peak of 7.8 percent, a level not witnessed since 2000. The mortgage rates for December 2023 are presently 6.95%.

The Federal Reserve and Interest rates. 

The Federal Reserve on Wednesday held off raising interest rates for now. Investors interpret this action as a signal that the central bank has concluded its battle against inflation and is now adopting a more hands-off stance to mitigate the risk of an economic downturn. Home buyers, in turn, can expect the Federal Reserve’s decision to bolster an enhanced economic outlook. However, housing experts caution that substantial relief in mortgage rates may still be several months down the road.

This week brought encouraging news for prospective homebuyers, with mortgage rates dipping below seven percent for the first time since August.

As inflation shows signs of deceleration and the Federal Reserve Board anticipates lowering the federal funds target rate next year, there is a high likelihood of a gradual improvement in the housing market as we enter the new year.

A surge in applications. 

During the week ending December 8, 2023, mortgage applications experienced a notable surge of 7.4%, surpassing the 2.8% increase reported in the previous week, as indicated by the latest Weekly Mortgage Applications Survey conducted by the Mortgage Bankers Association (MBA). Despite this positive trend, the purchase volume remains approximately 18% below the pace observed last year, underscoring the ongoing challenge for prospective homebuyers due to a limited housing inventory, despite the decrease in interest rates.

Responding to the decline in rates, refinance volume saw an uptick, with a particularly noteworthy increase in FHA and VA refinance applications. The refinance share of mortgage activity rose to 39.2% of total applications, up from the previous week’s 34.7%.

Interest rates, still more than twice as high as the levels observed in the early part of last year, and persistently high real estate prices have contributed to the continued scarcity of homes for sale. Existing homeowners are less inclined to move due to the prospect of assuming a more expensive home loan.

However, as interest rates begin to decline, there are early indications of a resurgence in buyer activity. The Mortgage Bankers Association has reported an uptick in mortgage applications, signaling a reversal from the October lows, which were the lowest since 1995.

Mortgage prequalification vs pre-approval

Mortgage prequalification and mortgage pre-approval are similar terms but are very different indeed. a pre-qualification or pre-qual is merely an opinion from a non-lender advising you on what they believe you can qualify for. A pre-approval is a formal approval by an accredited lender, someone that can actually lend the money. They collect your income, asset and credit documentation and put it through an abbreviated underwriting process and issue you a conditional approval.

Using a mortgage prequalification vs pre approval for basic informational purposes. If you just want to have an idea of how much you can afford, what payments might be, a prequal is quick and simple and can be completed over the phone or online in just a few minutes.

Using a mortgage prequalification vs preapproval for home shopping and making offers.. If you are ready to begin looking for a home and prepare to make an offer than a full-blown credit approval or pre-approval through an accredited lender is the best way to go 

Unfortunately these terms are intertwined, but are not the same. If you are in the looking stages of finding a home, The most beneficial process for you would be the pre-approval process. Submitting your documentation for credit review. Once you receive your conditional approval that will strengthen your offer. Both terms are a part of the mortgage prequal process.

The Pros and Cons of mortgage prequalification

Whether you decide to get pre-qualified or get pre-approved getting involved in a mortgage prequalification, the process will almost always benefit you.  if you get pre-approved you’re going to find out whether or not A lender is willing to lend you the money. if they do approve your loan you can now take that pre-approval letter and Shop with it. when making real estate offer, an offer on a home is always stronger when the seller knows you already have your financing lined up.

The only negative I can foresee with a mortgage pre-qualification are these two things and they both revolve around your credit being pulled. if you apply to several lenders, each individual lender will want to pull your credit. if it takes you a long time to find a home then your credit must be pulled to keep it up to date with your current lender. in either of these two situations, accessing your credit multiple times may result in a drop in your FICO scores.


There are many different types of home loans, all with different requirements and guidelines. Standard mortgage financing provides the best interest rates, but not always flexible terms. Alternative financing may offer flexible terms but higher interest rates.

Choosing the right types of home loans depends on your specific situation. Are you a first time homebuyer? Then a 30 fixed rate mortgage will offer you the most stability. Is this for a 2nd home or vacation home? Are you purchasing the home as an investment? Are you planning on renting out the home all year round or on a short term basis? Is this a starter home? How long do you plan on remaining in the home? The right types of homes loans for your specific needs takes understanding. Take your time choosing the product.