A “For Sale” sign is seen in front of a home in Arlington, Virginia, on August 22, 2023.
Andrew Caballero Reynolds | AFP | Getty Images
The average interest rate on a 30-year fixed mortgage fell 22 basis points to 6.4% on Friday, according to Mortgage News Daily. That’s the lowest rate since April 2023. The 15-year fixed rate fell to 5.89%, the lowest since early May 2023.
The drop came on the heels of a weaker-than-expected monthly jobs report, which sent bond yields sharply lower. Mortgage rates loosely track the yield on the 10-year U.S. Treasury note.
“Between (Fed Chair Jerome) Powell’s vague openness to “multiple cuts” in 2024 on Wednesday and this morning’s sharply weaker jobs report (something Powell didn’t know about until Wednesday), the narrative of more aggressive rate cuts is quickly coming into focus,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.
Graham noted that there are still two inflation reports and another employment report before the Fed's September meeting, adding: “If they don't provide strong counterpoints to recent data, the rate-cutting cycle has not only begun, but it is likely to carry a certain sense of urgency.”
The 30-year fixed rate started the week at 6.81%, so the drop in just the past five days has been dramatic. The most 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 improved since then, but prices are still too high.
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-rate mortgage would face a monthly payment of about $2,240, excluding insurance and property taxes. Today, that monthly payment would be about $2,000. And more buyers will qualify for the loan with today’s low interest rates.
According to the Mortgage Bankers Association, mortgage applications for home purchases are down about 15% from the same period last year. This latest decline could help boost demand.
“The market is moving ahead of the Fed, which is lowering longer-term interest rates including mortgage rates, which should lead to more home purchases and a pick-up in refinancing activity,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, said in a news release.
