The 30-year fixed-rate mortgage (FRM) remains at the low level seen recently, from last week’s average of 6.49% to a current average of 6.46%, according to the latest Primary Mortgage Market Survey® (PMMS®) from Freddie Mac released Thursday.
This week’s numbers:
- The 30-year FRM averaged 6.46%, down from last week when it averaged 6.49%. A year ago at this time, the 30-year FRM averaged 7.23%.
- The 15-year FRM averaged 5.62%, down from last week when it averaged 5.66%. A year ago at this time, the 15-year FRM averaged 6.55%.
The takeaways:
“Although mortgage rates have stayed relatively flat over the past couple of weeks, softer incoming economic data suggest rates will gently slope downward through the end of the year,” said Sam Khater, Freddie Mac’s chief economist. “Earlier this month, rates plunged and are now lingering just under 6.5 percent, which has not been enough to motivate potential homebuyers. We expect rates likely will need to decline another percentage point to generate buyer demand.”
Bright MLS Chief Economist Lisa Sturtevant commented:
“Freddie Mac reported that the average rate on a 30-year fixed rate mortgage fell slightly this week.
“Homebuyers welcome a drop in rates, but how far would rates need to fall to really take the edge of the affordability constraint? This summer, the median sold price nationally was about $425,000, according to data from the National Association of Realtors. Assuming a 30-year fixed rate mortgage, 7% mortgage rate, and a 10% down payment, the monthly mortgage payment would be $2,545.
“With rates at 6.4%, that monthly payment would be $2,393, or $152 less. For some homebuyers at the margins, this 0.6 percentage point drop in rates could make a difference.
“But the affordability challenge is still a major constraint. In 2021, when rates were at 3% and the median home sold for about $360,000, the typical borrower was only paying $1,366 per month. And home prices are still rising in most markets. Opportunities for moderate-income and first-time homebuyers will still be limited even with a drop in rates.“
Realtor.com Economist Jiayi Xu commented:
“The Freddie Mac rate for a 30-year mortgage declined slightly by 0.03 percentage points to 6.46% this week as the financial market is waiting for Fed Chair Powell’s speech on the central bank’s upcoming monetary policy on Friday. In July, inflation dropped below 3% for the first time since 2021, fueling widespread expectations that the Federal Reserve will initiate its first interest rate cuts in September. A lower Fed benchmark rate would lower consumer borrowing costs across the board, including mortgage. Meanwhile, the timing and extent of these cuts will also depend on the health of the labor market, the second key component of the Fed’s dual mandate. With the unemployment rate rising to 4.3% in July, concerns about a potential recession are prompting the Fed to pay closer attention to labor conditions. Policymakers are aiming to time the cuts carefully, seeking to curb inflation without triggering a sharp increase in unemployment.
“While investors have already factored in potential rate cuts, most home buyers and sellers may be holding off on decisions until the Federal Reserve formally announces the cuts. As a result, we expect to see an additional boost this fall due to changing market conditions. In our recent midyear housing forecast update, we’ve revised our year-end mortgage rate expectations down to 6.3% and predict a 14.5% annual increase in inventory for 2024. Lower rates and increased inventory present opportunities for buyers. However, with approximately 86% of existing mortgages locked in at rates of 6% or lower, mortgage rates will need to drop further to fully revitalize the housing market.”
