The average rate for a 30-year fixed mortgage fell to 6.2% this week, down from 6.35% the previous week, according to data released by Freddie Mac on Thursday. This rate is a significant decrease from 7.18% a year ago and represents the lowest level since February 2023.
For 15-year fixed mortgages, the average rate dropped to 5.27%, down from 5.47% last week and 6.51% a year prior.
Freddie Mac’s chief economist, Sam Khater, attributed the decline in rates to “more sedate” economic data. Despite this, the improvement in mortgage rates has yet to translate into a surge in home sales. Prospective buyers continue to be deterred by high home prices and ongoing supply shortages.
Recent data highlights a continued stagnation in the housing market. The Pending Home Sales Index, which tracks housing contracts, fell to 70.2 in July—the lowest since the National Association of Realtors began tracking it over two decades ago. This is down from 76.7 a year ago. A reading of 100 reflects contract activity levels from 2001.
Mortgage application activity has also been tepid. According to the Mortgage Bankers Association (MBA), applications to purchase homes increased by 2% from the previous week but remain below levels seen a year ago. Meanwhile, refinancing applications rose by 1% week-over-week and have more than doubled compared to last year. However, the benefit of refinancing is limited, as many existing homeowners already have mortgages with interest rates below 5%, noted Joel Kan, the MBA’s deputy chief economist.
Some potential buyers are awaiting further rate reductions, anticipating that the Federal Reserve will cut benchmark interest rates during its meeting next week. Recent trends in the job market and inflation suggest that the Fed may ease rates for the first time in over four years.
Jessica Lautz, deputy chief economist at the National Association of Realtors, highlighted the impact of recent rate decreases, noting, “This is a substantial savings compared to October 2023, when mortgage rates approached 7.8%. Homebuyers could potentially save over $4,000 annually.” However, she cautioned that the mortgage market has likely already factored in expected Fed rate cuts, given widespread anticipation of these changes in September.
