Average rate on a 30-year mortgage eases to 6.35%, its lowest level in more than a year

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The average rate on a 30-year mortgage eased for the second week in a row and remains at its lowest level in more than a year, good news for prospective homebuyers facing home prices near all-time highs.

The rate fell to 6.35% from 6.46% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 7.18%.

The last time the average rate was this low was May 11, 2023.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners seeking to refinance their home loan to a lower rate, also eased this week. The average rate fell to 5.51% from 5.62% last week. A year ago, it averaged 6.55%, Freddie Mac said.

“Mortgage rates fell again this week due to expectations of a Fed rate cut,” said Sam Khater, Freddie Mac’s chief economist. “Rates are expected to continue their decline, and while potential homebuyers are watching closely, a rebound in purchase activity remains elusive until we see further declines.”

Signs of waning inflation and a cooling job market have raised expectations the Federal Reserve will cut its benchmark interest rate next month for the first time in four years.

Mortgage rates are influenced by several factors, including how the bond market reacts to the central bank’s interest rate policy decisions. That can move the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.

The yield, which topped 4.7% in late April, has pulled back sharply since then on expectations the Fed’s next move would be to lower its main interest rate. It was at around 3.9% in afternoon trading in the bond market Thursday.

Traders on Wall Street see a high likelihood the Fed will lower its main interest rate by at least 1 percentage point by the end of the year, according to data from CME Group. That suggests the bond market has already priced in a series of Fed rate cuts this year, which could limit further easing in mortgage rates.

“As such, we shouldn’t expect the downward movement in mortgage rates to accelerate unless worse-than-expected economic indicators suggest the market is headed for anything but a soft landing,” said Ralph McLaughlin, senior economist at Realtor.com.

Most economists expect the average rate on a 30-year home loan to remain above 6% this year. Realtor.com’s latest forecast calls for the average rate to go no lower than 6.3% by the end of the year.

After climbing 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. That’s more than double what it was just three years ago.

Elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have kept many would-be homebuyers on the sidelines, extending the nation’s housing slump into its third year.

Sales of previously occupied U.S. homes are running below last year’s pace, though they ended a four-month slide in July as homebuyers seized on more attractive mortgage rates.

Still, new data on contract signings for U.S. homes, a bellwether for future home sales, point to potentially further slowing of home sales.

The National Association of Realtor’s pending home sales index fell 5.5% in July from the previous month, the trade group said Thursday. Pending transactions were down 8.5% from the same month last year.

A lag of a month or two usually exists between when a contract is signed and when the home sale is finalized. That suggests a possible pullback in sales of previously occupied U.S. homes for August or September.



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Lisa Holden
Lisa Holden
Lisa Holden is a news writer for LinkDaddy News. She writes health, sport, tech, and more. Some of her favorite topics include the latest trends in fitness and wellness, the best ways to use technology to improve your life, and the latest developments in medical research.

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