Key Takeaways
Mortgage rates fell for the second straight week to their lowest since mid-March, according to Freddie Mac. Mortgage rates have eased slightly from their high levels, but they remain elevated as the Federal Reserve continues to fight inflation. Economists believe mortgage rates could rise above 6.5% by the end of the year.
This week, average mortgage rates fell to their lowest level since mid-March.
The average rate on a 30-year fixed-rate mortgage is 6.77%, down 12 basis points from last week, according to Freddie Mac. Mortgage rates have generally been trending downward since early May, despite a few spikes. They're still well below their peaks last fall but far from the extremely low levels seen at the start of the pandemic.
“While mortgage rate easing hasn't come as quickly as many expected, the recent downward trend is positive news for homebuyers who have been stymied by high interest rates,” said Jiayi Xu, economist at Realtor.com.
Why are mortgage interest rates so high?
High interest rates, in lockstep with the Federal Reserve's efforts to fight inflation, have stifled the housing market for nearly two years.
To tame price inflation, the Federal Reserve has raised the influential federal funds rate to a 23-year high and has held it there for the past 12 months. Mortgage rates are heavily influenced by the federal funds rate and the yield on the 10-year Treasury note. These factors have pushed mortgage rates lower as the Fed eyed an imminent rate cut.
However, economists predict that buyers and sellers will likely still face interest rates above 6.5% through the remainder of 2024. That means potential buyers will continue to wait and see as interest rates push up monthly payments, while sellers will remain hesitant to put their homes on the market and make deals with historically ultra-low mortgage rates.
