Mortgage Rates Fall for Fourth Consecutive Week, Sparking Hopes for Buyers


Last updated: July 2, 2024

houses_in_a_rowThe national average for a 30-year fixed-rate mortgage dipped slightly to 6.86% from 6.87% last week, marking the lowest level since April, per Freddie Mac’s Thursday report.

This four-week decline offers a glimmer of hope for the sluggish housing market.

Home sellers have clung to their favorable mortgage rates, while buyers, grappling with affordability issues, have backed off.

But there’s a silver lining—rates are expected to continue their downward trend throughout the year, potentially easing both inventory and affordability woes.

Joel Kan, deputy chief economist at the Mortgage Bankers Association, notes, “We are probably going to see rates decline slowly from here through the end of the year. And if our forecast is right… that helps potential homebuyers.”

The Mortgage Bankers Association predicts that the Federal Reserve will cut its benchmark rate twice in 2024, potentially lowering mortgage rates to about 6.5% by year-end.

“I think the odds are still fluctuating, but that’s the base case,” Kan said, citing improved inflation data. In May, annual inflation eased with consumer prices rising 3.3% year over year.

Wells Fargo’s June economic summary also forecasts mortgage rates dropping to 6.5% by the end of the year, while Fannie Mae predicts a rate of 6.7%.

A nearly 40-basis-point drop in mortgage rates, as forecasted by the MBA, could “change the math drastically” for buyers, Kan said, enabling them to qualify for larger loans or reduce their monthly payments.

Since the Fed began raising rates in 2022, many buyers have been waiting on the sidelines for more affordable conditions.

At the current rate, a buyer would pay around $1,600 monthly on a $300,000 home with a 20% down payment, according to the Yahoo Finance mortgage calculator.

If rates drop to 6.5%, the monthly payment would decrease by nearly $100.

Despite these promising trends, mortgage application activity remains tepid. The MBA’s Market Composite Index, which measures weekly mortgage loan application volume, increased by less than 1% last week.

New mortgage applications rose by 1% but are still 13% lower than this time last year, while refinancing activity remained flat.

“As we go forward, if we continue to see the improvement in the inflationary picture,” Kan said, “[there is] more expectations that rates will come down.”

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