Rates Fall for 4 Straight Weeks to 6.58%, Boosting Buyer Confidence and Driving a Surge in Refinancing Applications
The average interest rate for 30-year fixed-rate mortgages in the United States has fallen to its lowest level in 10 months, raising hopes of breathing new life into the sluggish housing market. Freddie Mac, a leading mortgage lender, announced on Thursday that the average 30-year fixed mortgage rate dropped to 6.58% this week, down from 6.63% last week. This marks the lowest rate since October 24 of last year (6.54%) and the fourth consecutive week of decline. The rate for the 15-year fixed mortgage, which many homeowners prefer when refinancing, also edged down from 5.75% last week to 5.71% this week.
Mortgage rates began to climb sharply in early 2022 as the era of ultra-low rates during the pandemic came to an end, pushing the U.S. housing market into a prolonged sales slump. Last year, home sales dropped to their lowest level in nearly 30 years. The latest decline in rates stems largely from growing expectations that the Federal Reserve (Fed) will cut interest rates soon, following weaker-than-expected July employment data. The 10-year Treasury yield, a key benchmark for mortgage rates, has also been trending downward in recent weeks, reflecting this expectation.
However, inflation remains a key factor to watch. According to a report released Thursday, the Producer Price Index (PPI) for July surged 3.3% year-over-year, far exceeding economists’ forecasts of 2.5%. This could signal renewed inflationary pressure, which may drive Treasury yields and mortgage rates higher again, even if the Fed decides to cut its policy rate. Meanwhile, the Consumer Price Index (CPI) for July rose 2.7% year-over-year, matching June’s pace.
Experts expect the average 30-year fixed mortgage rate to remain above 6% for the rest of the year. Both Realtor.com and Fannie Mae forecast that rates could ease to around 6.4% by year-end. According to Joel Berner, Chief Economist at Realtor.com, the recent decline in rates is a positive signal for potential buyers who had been sidelined by high borrowing costs. However, he cautioned that it may still not be enough to draw buyers back into the market in significant numbers, as affordability remains a major hurdle. Even with slower price growth, the median sales price of existing homes reached a record high of $435,300 in June.
Meanwhile, the recent drop in mortgage rates has sparked renewed activity in the refinancing market. According to the Mortgage Bankers Association (MBA), overall mortgage applications jumped 10.9% last week compared to the previous week. Notably, refinance applications surged 23%, marking the largest weekly gain since April. Applications for adjustable-rate mortgages (ARMs) also spiked 25%, reaching their highest level since 2022.
