This week, the average rate for a 30-year mortgage in the U.S. dropped to 6.58%, the lowest in nearly ten months, according to Freddie Mac. Last week, the rate was 6.63%. To compare, a year ago, it was slightly lower at 6.49%.
For those looking to refinance, the 15-year fixed-rate mortgage also saw a decline. It went from 5.75% to 5.71%. A year back, it averaged 5.66%.
Since early 2022, high mortgage rates have kept many buyers on the sidelines. In fact, home sales last year hit their lowest level in nearly 30 years. This current drop in rates offers new hope for those wanting to buy.
Interestingly, this is the fourth consecutive week that rates have decreased. The latest average is the lowest since October, when it hit 6.54%.
Mortgage rates are influenced by various factors. The Federal Reserve’s interest policies and the bond market’s expectations play big roles. One key indicator is the 10-year Treasury yield. As of midday Thursday, it stood at 4.29%, up a tad from 4.24% the day before. Recent weak job data has raised speculation about possible Fed rate cuts next month.
However, a rate cut could also lead to higher inflation. A new report revealed that wholesale prices surged by 3.3% over the last year, exceeding economists’ forecasts of 2.5%. This could hint that prices might rise further.
As for consumer prices, they increased by 2.7% in July, unchanged from June. Higher inflation could lead to rising bond yields, which might push mortgage rates back up, even if the Fed cuts rates.
Experts predict that 30-year mortgage rates will likely stay above 6% this year. Realtor.com and Fannie Mae predict that the average rate could drop to around 6.4% by year-end. Even this decrease may not be sufficient to boost home affordability.
Despite a slowdown in home price growth, the median sales price for previously owned homes reached a record high of $435,300 in June. Joel Berner, an economist at Realtor.com, noted that while recent drops in rates have offered some encouragement, it’s uncertain if this will bring more buyers back into the market.
On a positive note, the decline in mortgage rates has spurred refinancing activity. The Mortgage Bankers Association reported a 10.9% increase in mortgage applications last week, largely driven by refinancing. Applications for refinancing accounted for nearly 47% of all mortgage requests, with refinances surging by 23%—the best performance since April.
Adjustable-rate mortgages also saw a spike, increasing by 25%, the highest since 2022. Many homeowners are not waiting for rates to drop further before refinancing, with cash-out refinancing reaching nearly a three-year high in the last quarter due to substantial equity gains from prior home price increases.
The interplay of mortgage rates, inflation, and the job market continues to shape the housing landscape. As factors shift, aspiring homeowners face both new opportunities and ongoing challenges.
