In a welcome development for prospective homebuyers, the average rate on a 30-year mortgage dipped this week to its lowest point in 15 months, easing some of the pressure in a challenging housing market.
According to mortgage buyer Freddie Mac, the rate fell to 6.46%, down from 6.49% last week. This marks a significant decrease from a year ago when the average rate stood at 7.23%.
The drop in rates has also spurred interest in refinancing, as 15-year fixed-rate mortgages saw their average rate fall to 5.62% this week.
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Experts attribute the decline in mortgage rates to signs of cooling inflation and a softening job market, fueling expectations that the Federal Reserve may cut its benchmark interest rate next month.
“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.
While the lower rates offer a glimmer of hope, the U.S. housing market remains in a sales slump, a consequence of the sharp rise in mortgage rates since 2022. The market is showing signs of recovery, however, with the average rate on a 30-year mortgage sliding to around 6.5% this month – its biggest downshift in more than a year.
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This pullback has triggered an increase in applications for home refinancing loans, but applications for home purchase loans have yet to see a similar surge.
“We expect rates likely will need to decline another percentage point to generate buyer demand,” Khater said.
Despite the challenges, the recent drop in mortgage rates offers a welcome respite for homebuyers and signals a potential turning point for the housing market.
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