Mortgage rates have fallen to their lowest level in more than a year, a balm for prospective home buyers and sellers in a challenging real estate market.
The average rate on 30-year mortgages, the most popular home loan in the United States, dropped to 6.47 percent this week, Freddie Mac reported on Thursday. That rate has been steadily easing since April, when it rose above 7 percent — a relief for not only buyers, but also potential sellers who have felt locked into lower rates on their existing loans and have kept their houses off the market. The decline, from 6.73 percent a week earlier, was the biggest this year.
Mortgage rates stood at around 3 percent in late 2021. They began climbing when the Federal Reserve started raising its benchmark rate to combat inflation, reaching levels not seen in two decades. “The decline in mortgage rates does increase prospective home buyers’ purchasing power and should begin to pique their interest in making a move,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
The decline in mortgage rates could also allow existing homeowners to refinance, Mr. Khater said. The share of market mortgage applications that reflect refinancing was the highest in more than two years, according to Freddie Mac. The Fed is expected to start lowering interest rates in September after holding them at 5.3 percent for the past year. Investors increasingly anticipate that the initial cut will be half a percentage point.
While the Fed’s benchmark rate and mortgage rates aren’t directly connected, a Fed rate cut could indirectly put even more downward pressure on mortgages. The 10-year U.S. Treasury yield, which underpins borrowing costs, dropped this week as panic ensued after a weaker-than-expected jobs report, contributing to the mortgage-rate movement.
The lower mortgage rate could encourage some homeowners to get into the market. We’re moving in the direction of lowering borrowing costs and less lock-in.
