Average rate on a 30-year mortgage eases to 6.46%, the lowest level in 15 months
The average interest rate on a 30-year mortgage fell to a 15-month low this week, a relief for homebuyers living in a housing market that remains unaffordable for many Americans.
The rate fell to 6.46% from 6.49% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 7.23%.
The average rate is now the lowest since mid-May last year, when it was 6.39%.
Borrowing costs on 15-year fixed-rate mortgages also fell this week, good news for homeowners looking to refinance their mortgages to a lower rate. The average rate fell to 5.62% from 5.66% last week. A year ago, the average was 6.55%, according to Freddie Mac.
Mortgage rates are expected to continue to trend downward overall this year as signs of declining inflation And a cooling labor market have raised expectations that the Federal Reserve to cut key interest rate during next month’s policy meeting, which would be the first relaxation of such measures in four years.
“While mortgage rates have remained relatively flat in recent weeks, softer economic data suggests rates will gradually decline through the end of the year,” said Sam Khater, chief economist at Freddie Mac.
After jumping to a 23-year high of 7.79% in October, the average rate on a 30-year mortgage has hovered around 7% for most of this year — more than double what it was three years ago. But this month, the average rate fell by the most in more than a year, to about 6.5%.
The recent drop in mortgage rates in general has led to an increase in the number of applications for home refinancing loanswhich is up 23% from a month ago, according to the Mortgage Bankers Association.
However, the number of applications for loans to purchase a home has lagged behind.
“We expect rates will probably have to come down another percentage point to stimulate buyer demand,” Khater said.
Rising mortgage rates, which can cost borrowers hundreds of dollars a month in extra costs, have kept many potential homebuyers on the sidelines, sending the country into a three-year housing recession.
Sales of previously occupied U.S. homes are progressing below last year’s pace, although they ended a four-month decline in July.
The interest rate on a 30-year mortgage is affected by several factors, including how the bond market responds to the central bank’s interest rate policy decisions. That can affect the price of the 10-year Treasury yield, which lenders use as a guide for pricing mortgages.
The yield, which topped 4.7% in late April, stood at 3.86% in the bond market at midday on Thursday, after mixed data on the U.S. economy, which has slowed under the weight of high interest rates meant to inflation under control.
Most economists expect the average rate on a 30-year mortgage to remain above 6% this year. That may not be enough for many potential homebuyers, given record home prices and a shortage of homes for sale in many markets.
“Home prices are still rising in most markets,” said Lisa Sturtevant, chief economist at Bright MLS. “Opportunities for middle-income homebuyers and first-time homebuyers will still be limited, even with a drop in rates.”