For buyers put off by high borrowing costs and high home prices, there was a brief window of opportunity when mortgage rates dropped to their lowest level of the year. According to Freddie Mac’s weekly lender survey, the average rate on a typical 30-year fixed mortgage decreased to 6.58% from 6.63% the week before. Rates last reached this level in October 2024.
In tandem with a decline in government bond yields, which affect borrowing costs throughout the economy, rates have loosened. Data showed that hiring slowed significantly over the summer, which put downward pressure on mortgage rates and caused yields to decline earlier this month. But Thursday’s hotter-than-expected inflation data caused yields to slightly increase. Data from Wednesday night is reflected in Freddie Mac’s survey.
Mortgage rates hit lowest level of the year
Activity has already increased as a result of the rate decline. Refinancing was a major factor in the increase in mortgage applications last week, according to the Mortgage Bankers Association (MBA). “What I’ve told our members is to just sort of expect there are going to be these moments of opportunity,” said Michael Fratantoni, MBA’s chief economist. “But don’t expect they’re going to last long.”
Additionally, inventory is getting better, which could help buyers even more. The median existing-home sales price in June reached a record $435,300, the highest since tracking started in 1999, according to the National Association of Realtors. Prices have not been updated to reflect inflation. Still, there are issues with affordability. For the third consecutive year, home sales are still weak, and rates are about twice as high as they were prior to 2022. Through 2025, the MBA predicts that mortgage rates will remain between 6.5% and 7%. Neil Bader, national director of retail lending at the Federal Savings Bank, stated that he believes the housing market is in a holding pattern.
Industry leaders concur that in order to rekindle the market, rates must decline more significantly. “When people are staring at a 6% or 7% rate they just start to get reluctant,” said Rick Arvielo, CEO and co-founder of New American Funding. “Affordability is still a major issue.”
In an effort to increase home affordability, President Trump has urged Jerome Powell, the chair of the Federal Reserve, to lower interest rates. However, mortgage rates move in tandem with changes in economic expectations and more closely track the yields on government bonds than the Fed’s benchmark rate.
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