The average rate for the popular 30-year fixed mortgage dropped by 22 basis points to 6.4% on Friday, according to Mortgage News Daily, marking its lowest level since April 2023. Similarly, the 15-year fixed rate fell to 5.89%, its lowest since early May 2023.
This decline followed a weaker-than-expected monthly employment report, which caused bond yields to fall rapidly. Mortgage rates generally follow the yield on the 10-year U.S. Treasury.
Matthew Graham, chief operating officer at Mortgage News Daily, commented on the situation, stating, “Between [Federal Reserve Chair Jerome] Powell’s openness to ‘multiple cuts’ in 2024 on Wednesday and this morning’s sharply weaker jobs report, the narrative for more aggressive rate cuts is quickly taking shape.” Graham added that there are still two inflation reports and another employment report before the Federal Reserve’s September meeting. He suggested that if these reports do not present strong counterpoints to recent data, the rate cut cycle could not only begin but also proceed with a certain sense of urgency.
The 30-year fixed rate started the week at 6.81%, making the drop over the past five days quite dramatic. The recent high of 7.52% in late April had been impacting home sales, which have been declining since then. Buyers have been grappling with not just high interest rates but also high home prices and limited supply. While supply has improved somewhat, prices remain high.
The difference in affordability over just a few months is significant. In April, a buyer looking to purchase a $400,000 home with a 20% down payment and a 30-year fixed mortgage would have faced a monthly payment of about $2,240, excluding insurance and property taxes. Today, that monthly payment would be around $2,000, making home loans more accessible to a larger number of buyers.
Mortgage applications to purchase a home have been running about 15% below where they were at the same time last year, according to the Mortgage Bankers Association. This latest drop in rates could stimulate demand.
Mike Fratantoni, chief economist for the Mortgage Bankers Association, noted in a news release, “The market is moving ahead of the Fed, bringing down longer-term rates including those for mortgages, which should lead to both more home purchases and a pickup in refinance activity.”
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