According to Freddie Mac, the average interest rate on the popular 30-year fixed-rate mortgage recently fell to 6.77%, the lowest level since mid-March 2024. The drop was down from 6.89% the previous week and is a continuation of a trend that has seen rates hover around the same level as they were at this time last year.
The main culprit is a decline in the yield on the 10-year Treasury note, which is closely tied to mortgage prices. The decline in yields comes amid signs that inflation is subsiding and expectations that the Federal Reserve may cut interest rates this year. The Federal Reserve has been keeping interest rates high to fight inflation, but recent economic data suggests that interest rates may be cut this year.
But demand remains cautious, with applications for purchases about 5% below spring levels. Buyers are holding off and are often waiting for interest rates to fall further before deciding, said Sam Carter, chief economist at Freddie Mac.
What this means for buyers
Falling mortgage rates are a positive development for prospective homebuyers, as lower borrowing costs make home buying more affordable. However, many potential buyers still face challenges, including high home prices and low inventory.
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The housing market has been under pressure, with existing home sales hitting their lowest level since 1995 due to previously high interest rates that have scared off both buyers and sellers.
While the slight decline in interest rates may be encouraging for buyers, many economists warn that the overall market picture remains mixed: Home prices are still rising, and many homeowners are reluctant to sell their properties because they will likely end up taking out new mortgages with higher interest rates than their current mortgages.