The average rate on a 30-year mortgage has dropped to its lowest level in over a year, providing a favorable opportunity for potential homebuyers and homeowners seeking to refinance at a lower rate. According to Freddie Mac, the rate decreased to 6.47% from 6.73% last week and significantly lower than the 6.96% average a year ago. This marks the second consecutive weekly decline, reaching its lowest point since mid-May last year at 6.39%.
Additionally, borrowing costs for 15-year fixed-rate mortgages, popular among those refinancing, also saw a decrease to 5.63% from 5.99% last week, compared to 6.34% a year ago. The Chief Economist at Freddie Mac noted that the decline in rates enhances purchasing power for homebuyers and presents refinancing opportunities for existing homeowners.
After peaking at 7.79% in October, the 30-year mortgage rate has mostly remained around 7% this year, more than double the rate from three years ago. These elevated rates have deterred potential buyers, contributing to the ongoing housing market slowdown.
The recent easing of mortgage rates can be attributed to diminishing inflation and a cooling job market, leading to expectations of a Federal Reserve interest rate cut next month. Mortgage rates are influenced by various factors, including the bond market's response to central bank decisions, affecting the 10-year Treasury yield used by lenders to price home loans.
Following a decline in the 10-year Treasury yield last week due to disappointing labor market data, mortgage rates have dropped. If bond yields continue to decrease in anticipation of a Fed rate cut, mortgage rates could further ease, although experts predict rates to remain above 6% this year.
The decline in rates has prompted a surge in homeowners seeking to refinance, with applications hitting a two-year high. However, for many potential homebuyers facing high housing prices and limited inventory, further rate reductions may be necessary to make homeownership more affordable.
Buyers are currently waiting for rates to decrease further and for more properties to enter the market before making their move, as indicated by the recent trends in the real estate market.
