Mortgage rates fall to lowest level in more than a year. – Today

A for sale sign is seen in front of a home in Arlington, Virginia, on August 22, 2023.

Andrew Caballero Reynolds | AFP | Getty Images

The average rate on the popular 30-year fixed mortgage fell 22 basis points to 6.4% on Friday, Mortgage News Daily reported. That’s the lowest rate since April 2023. The 15-year fixed rate fell to 5.89%, the lowest level since early May 2023.

The decline came as bond yields fell rapidly following a weaker-than-expected monthly jobs report. Mortgage rates typically follow the yield on the 10-year U.S. Treasury note.

Between Wednesday’s ambiguous openness by (Fed Chair Jerome) Powell to “multiple rate cuts” through 2024 and this morning’s much weaker jobs report (which Powell didn’t even know about Wednesday), a narrative of more aggressive rate cuts is quickly forming, writes Matthew Graham, COO of Mortgage News Daily.

Graham noted that two inflation reports and another jobs report are still missing before the Fed’s September meeting, adding: If they fail to provide strong evidence against recent data, then the rate-cutting cycle has not only begun, but may also involve a certain urgency.

The 30-year fixed rate started the week at 6.81%, so the drop in just the past five days is huge. The recent high was 7.52% in late April, and home sales have been falling since then. Buyers are not only dealing with high interest rates, but also high home prices and a lack of supply. Supply has improved since then, but prices remain high.

In terms of affordability, the difference in just a few months is significant. In April, a buyer who wanted to purchase a $400,000 home with a 20% down payment and a 30-year fixed mortgage would have paid about $2,240 per month, excluding insurance and property taxes. Today, the monthly payment is about $2,000. More buyers will also be able to qualify for loans at today’s lower interest rates.

Mortgage applications to purchase a home are down about 15% from a year ago, according to the Mortgage Bankers Association. The latest drop could boost demand.

The market is getting ahead of the Federal Reserve and lowering long-term interest rates, including mortgage rates, which should lead to more home purchases and an increase in refinance activity, Mike Fratantoni, chief economist for the Mortgage Bankers Association, wrote in a press release.