According to the latest data released by mortgage buyer Freddie Mac, the average rate on a 30-year mortgage inched up this week while remaining close to its lowest level in over a year. The rate climbed to 6.49% from 6.47% the previous week, with a notable decrease from 7.09% a year ago.
After reaching a 23-year high of 7.79% in October, the average 30-year mortgage rate has predominantly lingered around 7% throughout this year, more than double the rate from just three years ago. These heightened mortgage rates, resulting in increased monthly costs for borrowers, have dampened enthusiasm among homebuyers, extending the nation’s housing market slowdown into its third consecutive year.
In recent weeks, mortgage rates have shown signs of softening, attributed to diminishing inflation indicators and a cooling job market, fueling expectations that the Federal Reserve may slash its benchmark interest rate next month for the first time in four years.
Freddie Mac’s chief economist, Sam Khater, remarked on the market’s recent trajectory, highlighting the impact of rising mortgage rates in 2023 and the subsequent easing to around 6.5%. Khater anticipates a further downward trend in the coming months as inflation moderates, offering promising prospects for both potential buyers and sellers.
The 30-year mortgage rate is influenced by various factors, including the bond market’s response to central bank interest rate policies, which, in turn, affects the 10-year Treasury yield—a pivotal metric for lenders in determining home loan rates.
Amidst this landscape, homebuyers and refinancers have been encouraged by the recent dip in mortgage rates to 14-month lows. Notably, applications for home loans surged nearly 17% last week, primarily driven by a 35% spike in refinancing applications.
While borrowing costs for 15-year fixed-rate mortgages, popular among refinancing homeowners, saw a slight uptick this week to 5.66% from 5.63%, a notable drop from 6.46% a year ago.
Despite expectations that the average 30-year mortgage rate will likely remain above 6% this year, challenges persist for many prospective homebuyers facing soaring home prices and limited property availability in various markets. Realtor.com reports that a significant portion of outstanding home mortgages have rates at or below 6%, underscoring the necessity for further rate reductions to revitalize the housing market.
Looking ahead, a potential uptick in home sales could materialize if rates continue to decline and housing inventory expands, setting the stage for a potentially rejuvenated market in the upcoming months. With the summer traditionally being a bustling period for real estate, shifting market conditions may provide an additional boost to housing activity this fall, fostering renewed optimism among industry observers.
