A for sale sign in front of a home in Arlington, Virginia, on August 22, 2023.
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, according to Stats Mortgage News Daily. This is the lowest rate since April 2023.
The decline came as a weaker-than-expected monthly jobs report led to a rapid decline in bond yields. Mortgage rates roughly track the yield on the 10-year U.S. Treasury note.
“Between (Federal Reserve Chairman Powell) Powell’s equivocal openness to ‘multiple rate cuts’ in 2024 on Wednesday and this morning’s sharply weaker jobs report (which Powell didn’t even know about on Wednesday), a more aggressive rate cut narrative is coming soon There will be focus,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.
Graham noted that there are two more inflation reports and another jobs report ahead of the Fed’s September meeting, adding: “If they don’t provide strong contrast with recent data, then the rate-cutting cycle has not only begun. , and may involve a certain degree of influence.
The 30-year fixed rate started the week at 6.81%, so the decline over the past five days has been huge. The recent high was 7.52% in late April, and home sales have been declining since then. Buyers not only face high interest rates, but also high housing prices and a lack of supply. Supply has since improved, but prices remain overheated.
In terms of affordability, the difference in just a few months is noticeable. In April, a buyer who wanted to purchase a $400,000 home with a 20% down payment and a 30-year fixed mortgage would pay about $2,240 per month, not including insurance and property taxes. Today, monthly payments are about $2,000. More buyers will also be able to qualify for loans at today’s lower interest rates.
According to the Mortgage Bankers Association, applications for home-purchase mortgages are down about 15% from this time last year. The latest decline could boost demand.
“The market is getting ahead of the Fed in lowering long-term interest rates, including mortgages, which should lead to more home buying and an increase in refinancing activity,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, wrote.
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