The average 30-year fixed rate mortgage peaked in this latest cycle of Fed interest rate hikes at just under 8%. That was back in October 2023, according to Freddie Mac. Rates hovered right around 7% for a good part of this year.
But with the job market slowing and inflation easing, there’s a growing consensus the Fed will begin cutting short-term rates in September, and mortgage rates have been falling in anticipation.
Mortgage rates are now the lowest they’ve been since May of 2023, per Mike Fratantoni, chief economist and senior vice president of research and industry technology at the Mortgage Bankers Association.
“30-year mortgage rates are down more a half a percentage point over the past couple of weeks. We were above 7%, we’re at 6.5%,” he said.
And that’s led to a surge in new mortgage applications by recent homebuyers.
“Borrowers who had gotten 7%, 7.5%, 8% mortgages, they now have an opportunity to refinance,” said Fratantoni.
The decline in mortgage rates has not unleashed a surge in homebuying, however.
And Zillow economist Orphe Divounguy doesn’t think it will, because a lot of would-be first-time buyers have been squeezed out of the market by unaffordable prices.
“You have a big disconnect between buyers and sellers in today’s housing market. You have buyers that are feeling the pinch,” he said.
That contrasts with most current homeowners — who have little incentive to sell with their home equity rising and current mortgage rates still much higher than when they bought.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.