Mortgage rates inch closer to 6% following Fed rate cut
Average 30-year fixed mortgage rates fell again this week to 6.09%, though the move wasn’t directly tied to the Federal Reserve’s rate cut on Wednesday.
The average rate dropped 0.11 percentage point from a week earlier, according to Freddie Mac data released Thursday, leaving the average at the lowest level since early February 2023.
Fifteen-year mortgage rates also fell, to 5.15% from 5.27% a week ago.
In recent months, mortgage rates have dropped more than a percentage point in anticipation of the Fed’s move. At its meeting Wednesday, the central bank cut benchmark interest rates by 50 basis points to a range of 4.75% to 5% and indicated it plans to lower rates twice more by the end of the year.
Headed into the meeting, traders were divided on how much the Fed would cut, but the central bank’s decision to make a larger reduction wasn’t enough of a surprise to move mortgage rates materially — nor is it likely to drive them much lower from here, said Orphe Divounguy, a senior economist at Zillow.
“The markets really expected the current scenario,” Divounguy said. “Mortgage rates moved lower ahead of the Fed meeting. That has improved housing affordability.”
Read more: Mortgage and refinance rates today, September 19, 2024: Rates actually increase after Fed meeting
After a very slow summer, there are signs that buyers are beginning to take notice of the lower rates. Mortgage applications for home purchases and refinancings jumped more than 14% from a week earlier, according to the Mortgage Bankers Association.
Refinancing applications were particularly strong, more than doubling from the same period a year ago as homeowners seek to lower their monthly payments. The MBA estimated average 30-year mortgage rates at 6.15% for the week that ended on Friday.
Read more: Is now a good time to refinance your mortgage?
In August, sales of previously owned homes slipped 2.5% from July to an annual rate of 3.86 million, according to the National Association of Realtors. Median home prices hit $416,700 last month, a 3.1% increase from a year earlier.
“Mortgage rates continued declining towards the 6% mark, reviving purchase and refinance demand for many consumers,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “While mortgage rates do not directly follow moves by the Federal Reserve, this first cut in over four years will have an impact on the housing market.”
Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.
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