A “For Sale” sign in front of a home on Aug. 22, 2023, in Arlington, Virginia.
Andrew Caballero Reynolds | AFP | Getty Images
The average interest rate on the popular 30-year fixed mortgage fell 22 basis points to 6.4% on Friday, the lowest rate since April 2023. The 15-year fixed rate fell to 5.89%, the lowest since early May 2023, according to Mortgage News Daily.
The drop came after bond yields plummeted following a weaker-than-expected monthly jobs report. Mortgage rates roughly track the yield on the 10-year Treasury note.
“while [Federal Reserve Chair Jerome] “Given Chairman Powell’s vague stance on ‘multiple rate cuts’ in 2024 on Wednesday and the significantly weaker jobs report this morning (which Powell didn’t know about on Wednesday), a more aggressive rate cut scenario is quickly coming into focus,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.
Graham noted that two inflation measures and another employment index are still due to be released before the Fed’s September meeting, adding that “absent a strong rebuttal to the recent data, a rate-cutting cycle is likely to not only be underway but will be accompanied by some sense of urgency.”
The 30-year fixed rate began the week at 6.81%, so the drop over the past five days is dramatic. The most recent high was 7.52% in late April, and home sales have been declining since then. Buyers are struggling not only with high interest rates, but also with rising home prices and a lack of supply. Supply has since improved, but prices remain overheated.
The difference in just a few months is significant in terms of affordability. In April, a buyer looking to buy a $400,000 home with a 20 percent down payment and a 30-year fixed mortgage would have had a monthly payment of about $2,240, excluding insurance and property taxes. Today, that monthly payment is about $2,000. With today’s low interest rates, more buyers will qualify for a loan.
Mortgage applications for homebuyers are down about 15% from this time last year, according to the Mortgage Bankers Association, and the decline could spur demand.
“The market is moving ahead of the Fed, lowering longer-term interest rates, including mortgage rates, which should lead to increased home buying and stronger refinance activity,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, said in a news release.
