The average rate on a 30-year mortgage has decreased to 6.86%, the lowest level since early April, offering some relief to prospective homebuyers amid record-high home prices. This marks the fourth consecutive week of declining rates, which have hovered around 7% for much of the year. The dip, reported by Freddie Mac, shows a slight reduction from last week's rate of 6.87%. A year ago, the rate was 6.71%.
Despite the decline, home sales have been falling. According to ABC News, sales of previously occupied homes dropped in May for the third straight month. Sales of newly built single-family homes also saw declines in April and May, compared to the previous year, by 7.7% and 16.5%, respectively. The elevated mortgage rates have increased monthly costs for borrowers, deterring many potential homebuyers.
Freddie Mac's chief economist, Sam Khater, highlighted that the 30-year fixed-rate mortgage hit its lowest level in nearly three months and expects rates to continue to fall over the summer, potentially bringing more buyers back into the market. Khater noted that the economy is in relatively good shape by historical standards.
However, according to AOL, as of June 27, 2024, the average rate for a 30-year fixed mortgage was 7.00% for purchases and 7.02% for refinances, showing a slight increase from the previous week. Rates on a 15-year mortgage also edged up, averaging 6.46% for purchases and 6.50% for refinances. This discrepancy highlights the variability in mortgage rates reported by different sources and the continuing challenge of high borrowing costs.
Mortgage rates are influenced by several factors, including the bond market's reaction to the Federal Reserve's interest rate policy and movements in the 10-year Treasury yield. Recent economic data indicating slower growth has helped lower the 10-year Treasury yield, which could help contain inflation and potentially lead the Federal Reserve to reduce its main interest rate, currently at a 23-year high.
The Federal Reserve, as noted by AOL, has held its benchmark interest rate steady since July 2023, but officials have signaled a possible rate cut later this year. This has raised expectations for further easing of mortgage rates, which could improve affordability for homebuyers. However, Realtor.com economist Jiayi Xu cautioned that the anticipated rate cuts might not arrive soon enough to provide significant relief for first-time homebuyers this year.
As mortgage rates have eased in recent weeks, so have the monthly payments for homebuyers. The national median monthly payment on home loan applications in May was $2,219, down 1.6% from the previous month but still 2.5% higher than a year ago, according to the Mortgage Bankers Association. The association forecasts mortgage rates to drop closer to 6.5% by the end of the year, which might not be enough to entice homeowners with existing lower-rate mortgages to sell.
