The average long-term mortgage rates in the U.S. have significantly dropped, reaching a yearly low this week. According to Freddie Mac, the average rate on a 30-year fixed mortgage fell to 6.19%, down from 6.27% the previous week. This marks the third consecutive week of declines and is the lowest rate since October 3, 2022, when it averaged 6.12%.
Recent Trends in Mortgage Rates
The decline in mortgage rates is seen as a positive development for the housing market, which has struggled with sluggish sales. A year ago, the average rate was higher at 6.54%. Additionally, borrowing costs for 15-year fixed-rate mortgages also eased, dropping from 5.52% to 5.44% this week, down from 5.71% last year.
Influencing Factors
Various factors affect mortgage rates, primarily the Federal Reserve’s interest rate policy and investor expectations in the bond market. Typically, mortgage rates mirror the trajectory of the 10-year Treasury yield, which serves as a benchmark for lenders.
- The average 30-year mortgage rate has been over 6% since September 2022.
- Sales of previously owned homes reached a 30-year low last year.
- However, sales are improving, registering the fastest pace since February as rates have declined.
Future Outlook for Mortgage Rates
The recent decrease in rates began in July, coinciding with the Federal Reserve’s decision to reduce its main interest rate for the first time in over a year. The Fed’s September meeting forecasted additional rate cuts, influencing the 10-year Treasury yield, which was reported at 3.99% this past Thursday.
Despite the positive trend, experts caution that inflationary pressures and uncertainties may prevent substantial declines in mortgage rates. Jake Krimmel, a senior economist at Realtor.com, noted that while rate cuts are anticipated, they do not guarantee continued decreases in mortgage rates.
Refinancing Trends
The decrease in mortgage rates has encouraged many homeowners who had previously purchased at higher rates to consider refinancing. Mortgage applications saw a slight dip of 0.3% last week; however, refinance applications comprised nearly 56% of total submissions, a modest increase from the previous week.
Adjustable-rate mortgages are also attracting interest, making up 10.8% of all applications last week. For refinancing to appeal to a broader audience, mortgage rates must fall below 6%. Currently, around 80% of U.S. homeowners with mortgages hold rates below 6%, with over 53% under 4%.
As the market adjusts to these low rates, the housing sector may gradually recover, but ongoing monitoring of economic factors remains crucial.
