You are currently viewing Lowest Mortgage Rates in Over Six Months as Market Continues Downward Trend

Lowest Mortgage Rates in Over Six Months as Market Continues Downward Trend

Mortgage rates continued their downward trend last week, marking the sixth consecutive week of declines. However, despite the decrease, mortgage demand remains subdued. 

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (up to $766,550) fell to 6.29% from 6.43%, with points dropping to 0.55 from 0.56 for loans with a 20% down payment, according to the Mortgage Bankers Association (MBA). This represents the lowest rate since February 2023 and is nearly a full percentage point lower than the same week a year ago. 

Joel Kan, Vice President and Deputy Chief Economist at the MBA, attributed the decline to falling Treasury yields, which have been influenced by signs of cooling inflation, a decelerating job market, and the anticipated first rate cut from the Federal Reserve later this month. 

Despite the lower rates, total mortgage demand increased only slightly by 1.4% week-over-week, as per the MBA’s seasonally adjusted index. This figure includes adjustments for the Labor Day holiday. 

Refinance applications rose by 1% from the previous week but were up 106% compared to a year ago. While this represents a significant annual increase, the overall level of refinancing remains historically low due to the high rates from last year. 

Kan noted that many borrowers still benefit from sub-5% rates, and although there is potential for more refinancing as rates decline, many homeowners who might consider refinancing acquired their properties in the past two years when rates were significantly higher. 

Applications for home purchase mortgages increased by 2% for the week but were 3% lower compared to the same period last year. Kan observed that despite the lower rates, challenges related to affordability and limited housing inventory may still be impacting purchase decisions. 

Mortgage rates have continued to trend lower at the start of this week, according to Mortgage News Daily. However, the release of the consumer price index (CPI) on Wednesday could influence rates significantly. Matthew Graham, Chief Operating Officer of Mortgage News Daily, cautioned that while CPI typically might not have a major impact, the current pre-Fed rate cut environment could lead to a more volatile market response to the CPI report.