The average rate on a 30-year mortgage in the U.S. remains flat at 6.35%, according to Freddie Mac. This comes ahead of an expected interest rate cut from the Federal Reserve later this month. Signs of waning inflation and a cooling job market have raised expectations for the Fed’s decision. Borrowing costs on 15-year fixed-rate mortgages have eased slightly this week, with the average rate falling to 5.47%, down from 5.51% last week.
The bond market’s reaction to the central bank’s interest rate policy decisions plays a significant role in influencing mortgage rates. The trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans, is also impacted by these decisions. The yield, which had reached 4.7% in late April, has since decreased to 3.75% amid expectations of a Fed rate cut. This trend has been a key factor in the stabilization of mortgage rates in recent weeks.
Despite the current stability in mortgage rates, the average rate on a 30-year mortgage had reached a 23-year high of 7.79% in October. Throughout this year, it has hovered around 7%, more than double the rate from three years ago. These elevated mortgage rates have deterred many potential homebuyers, contributing to the ongoing housing slump in the country. Sales of previously occupied U.S. homes have been running below last year’s pace, although they saw a slight increase in July as buyers took advantage of more attractive mortgage rates.
However, new data on contract signings for U.S. homes suggest a potential slowdown in home sales in the coming months. The National Association of Realtors’ pending home sales index fell 5.5% in July compared to the previous month, with pending transactions down 8.5% from the same month last year. Typically, there is a lag of a month or two between when a contract is signed and when the home sale is finalized, indicating a possible decline in sales for August or September. This data reflects the challenges the housing market continues to face despite recent fluctuations in mortgage rates.
