The average rate on a 30-year fixed-rate mortgage has dropped significantly since early February. According to Freddie Mac, rates were down to 6.73% from a peak above 7.2% earlier this year.
It’s great to see mortgage rates hit a 15-month low. We’ve got a lot of work to do to help Virginians afford a place to call home—including by building more affordable housing here in our Commonwealth. https://t.co/eOgYTGfTru
— Tim Kaine (@timkaine) August 9, 2024
Additional data showed the average rate dipping as low as 6.3% earlier this week, the lowest level in over a year.
The average 30-year fixed mortgage rate last Friday: 6.40%
The average 30-year fixed mortgage rate today: 6.54%
Despite Monday's brief dip (6.34%), we actually ended up week-over-week
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— Lance Lambert (@NewsLambert) August 9, 2024
As bonds rallied amid a stock market sell-off, the yield on the 10-year Treasury note dropped to its lowest level in over a year, trading below 3.7% at session highs. Douglas Duncan, chief economist at Fannie Mae, explained that “when the 10-year Treasury comes down, the mortgage rate typically comes down with it. Maybe not as far, maybe sometimes further.
It depends on what else is happening in the market.”
"Rising interest rates reduced mobility in 2022-23 for households with mortgages by 16%"
"Households who moved despite being 'locked in' saw an average increase in annual mortgage payments worth nearly $5,000 as a result of their moves" https://t.co/CIgUYZSvZi pic.twitter.com/EhJEdX1jrh
— Nick Timiraos (@NickTimiraos) August 10, 2024
Duncan explained that bond traders have already priced in a rate cut, which has contributed to lower mortgage rates. One reason for the reset of the entire mortgage market was the expectation of the Fed cutting rates,” Duncan added. “So that’s as best as it can be embedded until the Fed actually takes that action.
Rate cuts influence refinancing trend
The market has incorporated that into its view.”
Recent housing data points to challenges with affordability as rates have stayed above 6% since early last year. Buyers remain hesitant, with mortgage applications for home purchases totaling 11% lower than a year ago.
Home prices hit record highs for the second consecutive month while the pace of existing home sales slowed, signaling that homeownership remains out of reach for many. Although prices have reached new highs, the pace of price growth has slowed as inventory rises amid affordability challenges. Meanwhile, some homeowners are taking the opportunity to refinance existing loans as rates have eased.
Applications to refinance a home loan rose 16% last week. Market participants have quickly raised expectations for a rate cut in September after a disappointing jobs report heightened fears of a recession. This could drive mortgage rates even lower.
The 30-year mortgage rates can continue to fall ahead of actual Fed rate cuts, as they are priced off of 5-10-year bonds, not the Fed Funds Rate,” Jeff DerGurahian, chief investment officer and head economist at LoanDepot, explained. “However, any further drop will likely be limited until we get more certainty on the timing and size of any initial Fed movement.”