The average rate on a 30-year mortgage has dropped to its lowest level in over a year, according to Freddie Mac. The rate now stands at 6.47%, down from 6.73% last week and 6.96% a year ago. This marks the second consecutive week of decline, reaching a level not seen since mid-May of the previous year.
The 15-year fixed-rate mortgage has also experienced a decrease, with the average rate falling to 5.63% from 5.99% last week. This reduction in borrowing costs is expected to boost affordability for potential homebuyers and provide refinancing opportunities for existing homeowners.
Sam Khater, Freddie Mac’s chief economist, suggests that this decline could stimulate interest among prospective buyers and encourage some homeowners to refinance. However, the housing market has been facing challenges, with sales of both existing and new homes declining in recent months.
The easing of mortgage rates is attributed to signs of waning inflation and a cooling job market, which have led to expectations that the Federal Reserve may cut its benchmark interest rate next month. Mortgage rates are influenced by various factors, including the bond market’s reaction to the Fed’s interest rate policy decisions.
The 10-year Treasury yield, a key factor in mortgage pricing, has also seen a recent pullback. While most economists anticipate the average 30-year mortgage rate to remain above 6% this year, further declines in bond yields could lead to additional easing of mortgage rates.
The recent rate drop has already sparked a surge in refinancing applications, which have reached their highest level in two years. However, experts note that rates may need to decrease further to significantly impact the housing market, given record-high prices and inventory shortages.
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