By Aarthi Swaminathan
‘Serious buyers may want to jump in sooner rather than later,’ one real-estate economist says
Mortgage rates are plunging as the financial markets try to make sense of the poor July jobs report.
The average rate on a 30-year mortgage fell to a 10-month low of 6.57% on Monday, down from 6.74% on July 28, according to Mortgage News Daily.
Home buyers and homeowners looking to refinance may be wondering if it’s a good time to jump in, or if they should wait to see if rates drop even further.
That’s a tough decision at a time when the U.S. economy’s future looks uncertain and finding a new job has gotten harder for people in search of work. People have been putting off buying homes due to uncertainty about the economy, according to a recent survey by Bright MLS.
But at the same time, many buyers and homeowners have been waiting for mortgage rates to drop. At present, “there’s a lot of opportunity out there for both home buyers and homeowners,” Alex Elezaj, chief strategy officer at United Wholesale Mortgage (UWMC), told MarketWatch.
“If you’re in the market to buy a home, lower rates could mean you can afford more houses for your money,” he added.
When rates drop, homeowners can look at not only lowering their existing mortgage rate, but also shortening their loan term, he added, such as going from a 30-year to a 15-year mortgage, if they are able to afford it. A shorter-term mortgage allows the homeowner to pay off their mortgage faster and reduce interest payments.
With the average rate on the 30-year mortgage at its lowest level since October, homeowners who are refinancing from higher interest rates could see substantial monthly savings.
If a homeowner has an outstanding mortgage-loan amount of $300,000 and a 30-year fixed-rate mortgage at 7.5%, that translates to a $2,100 monthly payment. If they were to refinance that loan to a 6.57% rate, that monthly payment would be about $1,900 – nearly $200 cheaper. The calculation only includes the principal and interest portion of the mortgage, and doesn’t account for additional fees involved in refinancing, such as closing costs and appraisal fees.
The vast majority of homeowners have a mortgage rate below 6%, according to a previous analysis of federal-government data by the real-estate platform Redfin. It’s the homeowners with mortgages over 7% who might stand to benefit the most from a drop in rates.
The 30-year fixed-rate mortgage has dropped nearly 20 basis points since Friday
The average rate for the 30-year mortgage fell 12 basis points on Friday after the markets digested the weaker-than-expected jobs report, and a further 6 points on Monday to 6.57%, according to Mortgage News Daily.
The big drop in mortgage rates was fueled in part by investors flocking to the 10-year Treasury note, which is seen as a risk-free asset. That’s pushing down 10-year yields, which in turn, brings the 30-year fixed-rate mortgage down, as the two move in tandem.
“This dip in mortgage rates gives house hunters a window of opportunity to buy before summer ends,” Daryl Fairweather, chief economist at Redfin, said in a statement.
The brokerage estimated that buyers looking for a house with a monthly budget of $3,000 have gained $20,000 in purchasing power since May, when the daily average mortgage rate hit a recent peak of 7.08%.
“While housing costs are still fairly high, the recent decline in rates boosts purchasing power and improves overall home-buying conditions,” Fairweather added. “Combined with the surplus of homes for sale on the market, serious buyers may want to jump in sooner rather than later.”
Despite falling mortgage rates, house hunters still face serious affordability challenges, with the median home price hitting an all-time high of $435,300 in June, according to the National Association of Realtors.
Related: Home prices hit an all-time high, but some regions are seeing price declines
How low will mortgage rates go from here?
Investors are also betting on a higher likelihood that the Federal Reserve will cut its benchmark interest rate at its upcoming September meeting.
To be sure, mortgage rates don’t directly follow the direction of the Fed’s benchmark short-term interest rate; instead, they tend to move in tandem with the yield on the 10-year Treasury note BX:TMUBMUSD10Y, which rises when investors see inflation ahead.
Related: Don’t blame Jerome Powell – or the Fed – if you can’t afford to buy a house right now
Whether mortgage rates will keep falling is unclear. Even though rates dropped significantly over the past two days, “the decline will be limited by uncertainty over the economic data to be released in coming weeks,” Chen Zhao, another economist at Redfin, wrote in a blog post after the jobs report was released Friday.
That’s in addition to the fact that the financial markets already expected the jobs report to show signs of weakness, she added.
In other words, whether mortgage rates will drop further will depend on whether the economy shows further signs of weakness before the Fed’s next meeting on Sept. 17.
-Aarthi Swaminathan
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08-04-25 1608ET
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