A “For Sale” sign in front of a home in Arlington, Virginia, on August 22, 2023.
Andrew Caballero-Reynolds | AFP | Getty Images
According to Mortgage News Daily, the average rate on the popular 30-year fixed mortgage fell 22 basis points to 6.4% on Friday. That's the lowest rate since April 2023. The 15-year fixed rate fell to 5.89%, its lowest level since early May 2023.
The drop came after a weaker-than-expected monthly jobs report sent bond yields tumbling. Mortgage rates roughly track the yield on 10-year U.S. Treasury bonds.
“Between [Federal Reserve Chair Jerome] “Powell's equivocal openness to 'multiple cuts' in 2024 on Wednesday and this morning's sharply weaker jobs report (something Powell didn't even know about on Wednesday) have the more aggressive rate cut narrative quickly gaining traction,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.
There are still two inflation reports and one on employment before the Fed's September meeting, Graham noted, adding: “If they do not offer strong counterpoints to recent data, the rate-cutting cycle has not only begun but will likely carry some sense of urgency.”
The 30-year fixed rate started the week at 6.81%, so the drop over the past five days is dramatic. The recent high was 7.52% in late April, and home sales have been falling ever since. Buyers were struggling not only with high interest rates, but also with high home prices and a lack of supply. Supply has since improved, but prices remain overheated.
The difference in just a few months is stark when it comes to affordability. In April, a buyer looking to purchase a $400,000 home with a 20% down payment and a 30-year fixed mortgage would have faced a monthly payment of about $2,240, not including insurance and property taxes. Today, that monthly payment would be about $2,000. Plus, more buyers would qualify for the loan at today’s lower rates.
According to the Mortgage Bankers Association, applications for home mortgages have been down 15% from last year's figures. This latest drop could boost demand.
“The market is moving ahead of the Fed, lowering long-term rates, including mortgage rates, which should lead to more home purchases and a pickup in refinancing activity,” Mike Fratantoni, chief economist for the Mortgage Bankers Association, wrote in a news release.
