Mortgage rates rose slightly from the previous week as investors continue to expect the Federal Reserve to cut interest rates next month.
The average rate on the 30-year fixed-rate mortgage ticked up to 6.49% from 6.47% last week, Freddie Mac reported on Thursday, marking its lowest level in more than a year. A year ago, the average rate on a 30-year fixed-rate loan was 7.09%.
Separately, the average rate for the 15-year fixed mortgage was 5.66%, up from 5.63% a week prior. The rate on a 15-year loan was 6.46% a year ago.
“While rates increased slightly this week, they remain more than half a percent lower than the same time last year,” Sam Khater, Freddie Mac’s chief economist, wrote in a statement.
“In 2023, the 30-year fixed-rate mortgage nearly hit 8 percent, slamming the brakes on the housing market. Now, the 30-year fixed-rate hovers around 6.5 percent and will likely trend down in the coming months as inflation continues to slow. Lower rates are good news for potential buyers and sellers alike.”
Mortgage and refinance rates today: Rates are still below 52-week averages
Bond traders have been expecting that the Fed will cut rates next month, which has pushed mortgage rates lower in recent weeks. Borrowing costs could drop even further ahead of the Fed’s next policy meeting as investors debate how large of a rate reduction the Fed could implement.
Despite this week's uptick, the recent downward trend in rates has spurred some activity in the market. Applications to purchase a home increased 3% from the previous week, but still are 8% lower than the same week a year ago, per data from the Mortgage Bankers Association (MBA) released Wednesday.
Meanwhile, homeowners are capitalizing on the opportunity to restructure their existing loans.
Applications to refinance a home loan surged 35% from the previous week and were 118% higher than the same week a year ago, according to MBA, the strongest weekly gain since May 2022.
Mortgage refinance: How to get started
Still, housing affordability continues to be a dilemma. Buyers are dealing with more than just high interest rates. They are facing record- high home prices and low supply. In the second quarter, affordability deteriorated as mortgage rates remained elevated, per the National Association of Realtors (NAR) affordability indicator.
The index — which measures the likelihood that the average income household can qualify for a loan on the average house in a region based on quarterly price — dropped to 94.3 in the quarter versus 98.7 during the same quarter a year ago. A score of 100 indicates that a family has enough to afford a home in the area. Any score below means limited affordability.
The monthly mortgage payment on an existing home with a 20% down payment was $2,262, 11.1% higher than the first quarter, according to fresh data released Tuesday from the National Association of Realtors . Families typically spent over 26% of their income on mortgage payments.
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