Mortgage rates fell from last week, a positive development for the U.S. housing market.
The average interest rate on a 30-year fixed-rate mortgage fell to 6.77% from 6.89% last week, Freddie Mac said Thursday, the lowest since mid-March. A year ago, the average interest rate on a 30-year fixed-rate mortgage was 6.78%, Freddie Mac said.
Meanwhile, the average interest rate on a 15-year fixed mortgage was 6.05%, down from 6.17% last week and 6.06% a year ago.
“Mortgage rates are moving in the right direction and the economy remains strong, two positive signs for the housing market,” Sam Carter, chief economist at Freddie Mac, said in a press release.
Read more: Mortgage rates as of July 18, 2024: 15-year rates still below 6%
Despite falling interest rates, homebuyers don't seem impressed: Mortgage applications to buy a home fell 3% this week, seasonally adjusted.
Demand for new homes is under pressure: Mortgage applications for new homes fell 16% from May to June, according to the Mortgage Bankers Association.
“Homebuyers have not yet responded to lower interest rates. Purchase application demand is still about 5 percent lower than it was in the spring, when interest rates were about the same. This is not unusual; lower interest rates can also dampen demand, and this apparent contradiction is because buyers are trying to avoid rates falling further before they make a purchase decision,” Carter said.
Meanwhile, there was a strong increase in mortgage refinancing last week, with many homeowners taking advantage of lower mortgage rates to lower the interest rate on their current mortgage.
Mortgage refinance applications rose 15% last week from the previous week to the highest level since August 2022, the Mortgage Bankers Association reported.
Read more: Refinancing your mortgage: How to get started
The average interest rate on a 30-year fixed-rate mortgage fell to 6.77% from 6.89% a week ago. (Brandon Bell via Getty Images)
High interest rates have been a drag on the housing market over the past few years, forcing would-be buyers to back out of buying due to the burden of high monthly payments, while sellers, stuck with ultra-low mortgage rates due to the pandemic, are hesitant to sell.
Read more: Is now a good time to buy a house?
The downward trend in mortgage rates is likely to continue as interest rate cuts by the Federal Reserve are on the horizon, with market observers expecting the first rate cut this year to come as soon as September as the economy shows signs of cooling.
“Both buyers and sellers are expected to enter the market, making it potentially the most balanced market we've seen in years,” Lisa Sturtevant, chief economist at Bright MLS, said in an email to Yahoo Finance.
Dani Romero is a reporter for Yahoo Finance. Follow him on Twitter. Dani Romero TV.
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