3 MIN READ
Published July 12, 2024
LOS ANGELES (KreditSanta News) - Homebuyers received a slight break this week as the average rate on a 30-year mortgage decreased to 6.89% from last week’s 6.95%, according to Freddie Mac. This minor reduction provides a bit of relief amidst high home prices.
For most of this year, the average rate has been around 7%, significantly higher than the rates three years ago. These higher rates have added hundreds of dollars to monthly payments, discouraging many potential buyers and extending the housing market slump into its third year.
Rates for 15-year fixed-rate mortgages, which are popular with homeowners refinancing, also fell to 6.17% from 6.25%. A year ago, the rate was 6.30%, Freddie Mac reported.
Mortgage rates are influenced by several factors, including the bond market’s response to the Federal Reserve’s interest-rate decisions and the movements of the 10-year Treasury yield, which lenders use to set mortgage rates. The yield, which was over 4.7% in late April, has generally been dropping as hopes rise that slowing inflation will lead the Fed to reduce its main interest rate, now at its highest in over 20 years.
“Following June’s jobs report, which showed a cooling labor market, the 10-year Treasury yield decreased this week and mortgage rates followed suit,” said Sam Khater, Freddie Mac’s chief economist.
On Thursday, the yield fell to 4.18% after new inflation data boosted expectations for a Fed rate cut. Fed officials have stated that while inflation is closer to their 2% target, they need more data to confirm this trend before reducing rates.
Most economists expect the Fed’s first rate cut in September, with another possible cut by year’s end. Until then, long-term mortgage rates are likely to stay around their current levels, although a gradual decrease in mortgage rates is possible if bond yields continue to drop.
“Although volatile, we should see 10-year Treasury rates continue on a downward trend and, as a result, a slow decline in mortgage rates throughout the rest of the year,” said Ralph McLaughlin, senior economist at Realtor.com.
High home prices and a limited supply of available homes have discouraged many potential buyers this spring, typically the busiest time for the housing market. Sales of previously owned homes in the U.S. fell for the third month in a row in May, with early signs pointing to a similar trend in June.
Even with forecasts suggesting mortgage rates may ease, most economists believe the average 30-year mortgage rate will stay above 6% this year. This may not be enough to attract buyers waiting for lower rates or convince homeowners with low locked-in rates to sell.
“There are definitely some people I’m working with that are considering waiting till next year," said Dane Gates, broker associate with Better Homes and Gardens Real Estate in Houston.