The 30-year fixed-rate mortgage (FRM) dropped drastically to the lowest level seen in over a year, from last week’s average of 6.73% to a current average of 6.47%, according to the latest Primary Mortgage Market Survey® (PMMS®) from Freddie Mac released Thursday.
This week’s numbers:
- The 30-year FRM averaged 6.47%, down from last week when it averaged 6.73%. A year ago at this time, the 30-year FRM averaged 6.96%.
- The 15-year FRM averaged 5.63%, down from last week when it averaged 5.99%. A year ago at this time, the 15-year FRM averaged 6.34%.
The takeaways:
“Mortgage rates plunged this week to their lowest level in over a year following the likely overreaction to a less than favorable employment report and financial market turbulence for an economy that remains on solid footing,” said Sam Khater, Freddie Mac’s chief economist. “The decline in mortgage rates does increase prospective homebuyers’ purchasing power and should begin to pique their interest in making a move. Additionally, this drop in rates is already providing some existing homeowners the opportunity to refinance, with the refinance share of market mortgage applications reaching nearly 42 percent, the highest since March 2022.”
Realtor.com Senior Economist Ralph McLaughlin commented:
“The Freddie Mac rate for a 30-year mortgage declined by 0.26 percentage points to 6.47% this week, the lowest level since May 2023, as 10-year Treasury yields dropped into the 3.7% – 4% range since the prior week’s survey. The strong downward trend in 10-year yields has been driven by two primary factors. First, the market has priced in rate cuts in September and December due to recent positive inflation readings. Second, July’s unexpectedly low employment reading has led some investors to believe we may already be in a recession so they have sought safety in the bond market. This move towards bonds has driven down 10-year treasuries to lows not seen since last year, and thus mortgage rates have fallen.
How much has the drop in mortgage rates saved borrowers since they hit their peak in October 2023? Using a median listing price of $440,000, the monthly interest and principal payment would have been $2,532 back in October 2023, assuming a 20% down payment and 7.79% mortgage rate. That payment with today’s rate of 6.47% would be $2,218 – a savings of over $300 per month.
As a result of these recent declines, mortgage rate relief is arriving quicker than many expected, and the recent downward trend is encouraging news for potential homebuyers who have been waiting until next year to participate in the market. In addition, the increase in affordable inventory may be enough to draw in some of the buyers to the market this fall, leading to an uncharacteristic bump in the market during a time that normally sees seasonal cooling. Looking ahead, we expect this year’s elevated inventory to be able to absorb an unexpected demand that may come from falling mortgage rates this fall, and as such, we don’t expect home price growth to deviate much, if at all, from a stabilized trajectory.”
