Mortgage Rates Fall to Lowest Point Since May 2023

Article originally posted on CoStar on August 8, 2024

Mortgage rates fell to their lowest point in more than a year, a slide that some analysts say could buttress the housing market and fuel a wave of refinancings.

The 30-year fixed-rate mortgage averaged 6.47% as of Aug. 8, down from 6.73% last week and from 6.96% a year earlier, mortgage giant Freddie Mac said Thursday. The rate hasn’t been this low since May 2023.

The 15-year fixed-rate mortgage also fell, to 5.63% from 5.99% last week and from 6.34% in the same week of August 2023, Freddie Mac said.

Such a large drop in the 30-year mortgage rate after smaller declines in recent weeks may have been an overreaction to a worse-than-expected July employment report and recent stock market volatility, according to 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,” he said in a statement.

But as of Thursday afternoon, the 30-year fixed-rate mortgage averaged 6.63%, according to Mortgage News Daily. Its 15-year fixed-rate mortgage averaged 6.15%.

At its July meeting last week, the Federal Reserve left interest rates unchanged, but it signaled a potential lowering of rates in September. That would be the first change in more than two years and further lift the housing market.

Despite falling rates in recent weeks, purchase activity posted only modest gains, according to Joel Kan, the Mortgage Bankers Association’s vice president and deputy chief economist. He noted that an increase in conventional mortgage applications had been offset by decreases in government mortgage applications.

“For-sale inventory is beginning to increase gradually in some parts of the country, and homebuyers might be biding their time to enter the market given the prospect of lower rates,” he said in a statement.

Last week’s drop in interest rates did spur mortgage refinancings, and this latest decline could make refinancing even more attractive to homeowners, analysts said. Any increases in demand for houses can have an effect on the multifamily market with renters moving to buy.

Refinance applications posted a 20% week-over-week increase, according to mortgage giant Fannie Mae. The activity was the highest since September 2022, when mortgage rates began closing in on 7% for the first time since 2002, Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a statement.

“If the recent drop in longer-term rates is sustained, then we expect to see another uptick in refinance applications and subsequent refinance mortgage volumes this week,” he said.