The average rate on a 30-year mortgage fell this week to its lowest level in more than a year, a welcome affordability boost for prospective home shoppers and homeowners looking to refinance their home loan to a lower rate.
The rate fell to 6.47% from 6.73% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.96%.
This is the second straight weekly drop in the average rate. It’s now the lowest it’s been since mid-May last year, when it was 6.39%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell this week, pulling the average rate down to 5.63% from 5.99% last week. A year ago, it averaged 6.34%, Freddie Mac said.
“The decline in mortgage rates does increase prospective homebuyers’ purchasing power and should begin to pique their interest in making a move,” said Sam Khater, Freddie Mac’s chief economist. “Additionally, this drop in rates is already providing some existing homeowners the opportunity to refinance.”
After jumping to a 23-year high of 7.79% in October, the average rate on a 30-year mortgage has mostly hovered around 7% this year — more than double what it was just three years ago.
The elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers, extending the nation’s housing slump into its third year.
Sales of previously occupied U.S. homes fell in June for the fourth month in a row. And sales of new single-family homes fell last month to the slowest annual pace since November.
Rates have mostly eased in recent weeks as signs of waning inflation and a cooling job market have raised expectations that the Federal Reserve will cut its benchmark interest rate next month for the first time in four years.
Mortgage rates are influenced by several factors, including how the bond market reacts to the central bank’s interest rate policy decisions. That can move the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.
This week’s drop in mortgage rates follows a pullback in the 10-year Treasury yield, which briefly slid last week to around 3.7% after worse-than-expected labor market data rattled investors, pushing up demand for bonds.
The yield, which topped 4.7% in late April, was at 4% in afternoon trading in the bond market on Thursday.
If bond yields continue to decline in anticipation of the Fed lowering rates this fall, that could lead mortgage rates to ease further, though most economists expect the average rate on a 30-year home loan to remain above 6% this year.
Even so, the recent pullback in mortgage rates has already spurred a surge in homeowners seeking to refinance. Applications for mortgage refinance loans jumped last week to their highest level in two years.
Rates may have to come down more before many would-be homebuyers facing record-high housing prices and a chronic shortage of properties on the market can afford to buy a home.
“Buyers are biding their time, waiting for rates to fall further and for more inventory to come onto the market,” said Lisa Sturtevant, chief economist at Bright MLS.
FILE - A housing development in Cranberry Township, Pa., is shown on March 29, 2024. (AP Photo/Gene J. Puskar, File)
NEW YORK (AP) — Wall Street is quieter on Friday, and U.S. stocks are edging back from the records they set the day before during a worldwide rally.
The S&P 500 was 0.3% lower in morning trading but still on track for its fifth winning week in the last six. The Dow Jones Industrial Average was down 71 points, or 0.2%, after it likewise set an all-time high the day before. The Nasdaq composite was 0.3% lower, as of 10:30 a.m. Eastern time.
FedEx dragged on the market with a drop of 14.8% after its profit and revenue for the latest quarter fell short of analysts’ expectations. It said U.S. customers sent fewer packages through priority services, while it had to contend with higher wages for workers and other costs. FedEx also cut its forecast for revenue growth for its fiscal year.
Helping to limit the market's losses was Nike, which ran 5.4% higher after it named Elliott Hill as its chief executive. Hill, 60, had spent more than three decades at Nike in various leadership positions before retiring in 2020. He replaces the retiring John Donahoe.
Shares in Trump Media and Technology Group slumped another 6.8% as its biggest shareholder, former President Donald Trump, won the freedom to sell his shares if he wants.
Trump owns more than half of the nearly $3 billion company behind the Truth Social platform. But Trump and other insiders in the company had been unable to cash in because a “lock-up agreement” prevented them from selling any of their shares. Before the lockup expired, Trump said he was in no rush to sell.
TMTG stock has dropped below $14 from more than $60 in March, and its decline Friday was in line with its volatile history. Over the last six months, it’s often swung by at least 5% in a day, up or down.
Homebuilder Lennar fell 4.6% after delivering a mixed earnings report. Its profit for the latest quarter topped expectations. But it also said it made less in profit on each $100 of home sales, and it expects that margin to stay flat in the current quarter.
Conditions may be set to improve for homebuilders, though. The Federal Reserve earlier this week cut its main interest rate for the first time in more than four years, with more likely to come. That could make mortgages more affordable for home buyers.
The momentous move closed the door on a run where the Fed kept its main interest rate at a two-decade high in hopes of slowing the U.S. economy enough to stamp out high inflation. Now that inflation has fallen from its peak two summers ago, Chair Jerome Powell said the Fed can focus more on keeping the job market solid and the economy out of a recession.
The Fed is still under pressure because hiring has begun to slow under the weight of higher interest rates. Some critics say the central bank waited too long to cut rates and may have damaged the economy.
Critics also say the U.S. stock market may be running too hot on hopes that the Federal Reserve will be able to pull off what earlier seemed nearly impossible: getting inflation down to 2% without creating a recession.
Barry Bannister, chief equity strategist at Stifel, is still calling for a sharp drop for the S&P 500 by the end of the year. He points to how much faster stock prices have climbed than profits at companies. When stocks have looked this expensive on such measures in the past, he said a recession and sharp downturn for stocks has followed.
He also warned in a report that slowing hiring “is now symbolic of recession risk.”
No economic releases are on the calendar for Friday to show where the economy may be heading. Next week will have preliminary reports on U.S. business activity, the final revision for how quickly the economy grew during the summer and the latest update on spending by U.S. consumers.
In the bond market, the yield on the 10-year Treasury rose to 3.75% from 3.72% late Thursday.
In stock markets abroad, indexes dropped across much of Europe after rising in Asia. Tokyo’s Nikkei 225 rose 1.5% after the Bank of Japan left interest rates steady, as was expected.
In China, the central bank left key lending rates unchanged on Friday. Indexes rose by 1.4% in Hong Kong and less than 0.1% in Shanghai.
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AP Writers Matt Ott and Zimo Zhong contributed.
A bus passes the Wall St. subway station on Wednesday, Sept. 18, 2024, in New York. (AP Photo/Peter Morgan)
Trader Michale Conlon, right, works on the floor of the New York Stock Exchange as Federal Reserve Chair Jerome Powell's news conference appears on a television screen behind him, Wednesday, Sept. 18, 2024. (AP Photo/Richard Drew)
A person walks in front of an electronic stock board showing Japan's Nikkei index and Japanese Yen exchange rate at a securities firm Friday, Sept. 20, 2024, in Tokyo. (AP Photo/Eugene Hoshiko)
A person stands in front of an electronic stock board showing Japan's Nikkei index at a securities firm Friday, Sept. 20, 2024, in Tokyo. (AP Photo/Eugene Hoshiko)
People ride bicycles in front of an electronic stock board showing Japan's Nikkei index at a securities firm Friday, Sept. 20, 2024, in Tokyo. (AP Photo/Eugene Hoshiko)
A person rides a bicycle in front of an electronic stock board showing Japan's Nikkei index at a securities firm Friday, Sept. 20, 2024, in Tokyo. (AP Photo/Eugene Hoshiko)
