Mortgage rates lower as talk of interest rate cuts intensify: Freddie Mac

Mortgage rates tumbled further this week as strong economic data and a positive inflation report provided some reassurance that the Federal Reserve may finally pull the trigger on interest rate reductions.

The average 30-year fixed-rate mortgage was 6.77% for the week ending July 18, according to Freddie Mac's latest Primary Mortgage Market Survey. That's a decrease from the previous week when it averaged 6.89%, almost aligning with the 6.78% it was a year ago. 

The average rate for a 15-year mortgage was 6.05%, down from 6.17% last week and down from 6.06% last year. 

Mortgage rates continue to drop as signs that the Fed, which has held its policy rate in the 5.25%-5.50% range for the past year, will cut borrowing costs soon. Speaking at the Economic Club of Washington D.C. earlier this week, Fed chair Jerome Powell said that the central bank won't wait for inflation to hit the 2% target rate before cutting interest rates due to the policy's long lag effect. Instead, they seek greater confidence that inflation will return to the target before initiating rate cuts. 

"Fortunately, June's more moderate jobs report and cooling CPI were solid readings that should help the Fed gain more confidence that the economy is moving in the right direction and could raise hopes for a rate cut signal in the July FOMC statement," Realtor.com Economist Jiayi Xu said in a statement.

Homebuyers, however, have been slow to pick up the pace despite mortgage rates dropping to the lowest level since mid-March, according to Freddie Mac's Chief Economist Sam Khater.

"Mortgage rates are headed in the right direction and the economy remains resilient, two positive incremental signs for the housing market," Khater said. "However, homebuyers have yet to respond to lower rates, as purchase application demand is still roughly 5% below Spring, when rates were approximately the same. This is not uncommon: sometimes as rates decline, demand weakens, and the apparent paradox is driven by buyers making sure rates don't decline further before they decide to purchase."

If you're considering becoming a homeowner, it could help to shop around to find the best mortgage rate. Visit Credible to compare options from different lenders and choose the one with the best rate for you.

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Refinancing activity heats up

The drop in mortgage rates has spurred activity in home loan refinance applications, according to the Mortgage Bankers Association. Mortgage applications were up 3.9% the week ending July 12, 2024, driven by a 15% jump in refinances to the highest level since August 2022. Demand for refinancings was 37% higher than the same week one year ago when mortgage rates were the same.

"Signs of cooling inflation, and the increased likelihood of the Federal Reserve cutting rates this fall, should cause mortgage rates to move lower, which would be welcome news to prospective homebuyers who may be unwilling, or unable, to jump into the housing market at today's costs," MBA CEO Bob Broeksmit said.

In the meantime, housing supply keeps building. The number of homes actively for sale grew by 36.7% in June, an eighth straight month of growth, but prices keep rising, according to a Realtor.com report.

"The increase in affordable inventory brings hope to first-time homebuyers who lack substantial home equity to leverage," Xu said. "Nevertheless, similar-sized homes are still more expensive than a year ago, with the listing price per square foot increasing by 3.4% in June compared to last year. Looking ahead, we expect the rising inventory to gradually exert downward pressure on price growth and falling mortgage rates to help lower borrowing costs, providing more relief to potential homebuyers."

If you'd like to see if you qualify for a mortgage based on your current credit score and salary, consider visiting Credible, where you can compare multiple mortgage lenders at once.

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Housing affordability is the top concern for Americans

Housing affordability is the top concern for younger Americans as they head to the polls for the Nov. 5 presidential election, according to a recent Redfin survey.

Roughly 91% of Gen Zers ranked housing affordability as an essential factor in their vote above other issues, including the economy, abortion and gun rights, preserving democracy, and foreign wars, the survey said. Millennials, Gen Xers and baby boomers considered the economy the most critical factor in their presidential pick. Gen Xers and baby boomers also ranked preserving democracy above housing affordability. 

"Housing affordability is a cornerstone of this year's presidential election because even though the economy is fairly strong, unemployment is low and wages are rising, buying a home feels impossible for many Americans," Redfin Senior Economist Elijah de la Campa said. "This is particularly the case for young people, who have seen the cost of starter homes increase twice as fast as incomes."

"Young people care about other political issues, like immigration and abortion rights, but they're more likely to cite housing affordability as a factor in their vote because it directly impacts the roof over their head, their lifestyle and their ability to build wealth," de la Campa continued.

If you are ready to shop for the best rate on a new mortgage, consider visiting an online marketplace like Credible to compare rates with multiple lenders at once.

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