Borrowing costs dropped to their lowest level since April, providing a spark to the beleaguered housing market following a week of disappointing economic news.
The 30-year, fixed-rate mortgage averaged 6.63% as of Thursday, down from 6.72% last week but still higher than the 6.47% during the same week of 2024, according to mortgage giant Freddie Mac, which buys loans from banks, bundles them into securities and sells them. It was the third straight weekly decline.
The 15-year, fixed-rate mortgage averaged 5.75%, lower than last week's 5.85%, Freddie Mac reported. A year ago, the 15-year rate averaged 5.63%.
Last Wednesday, Federal Reserve Chairman Jerome Powell resisted President Donald Trump's call for a rate cut and announced that a divided central bank was leaving interest rates unchanged until at least September. Though the Fed doesn't set mortgage rates, its decisions often affect how lenders react.
But last Friday, the Bureau of Labor Statistics released a June jobs report that was much weaker than expected, and that could have been the impetus for the noticeable decline in mortgage rates, said Sean Salter, a real estate researcher and finance professor at Middle Tennessee State University.
"I think that set the stage for mortgage lenders to re-evaluate things," Salter told Homes.com. "They're not making money if consumers aren't getting loans. This is a clear sign that everybody in the industry fully expects the Fed has to do something."
'Risks of higher inflation could keep rates elevated'
Lisa Sturtevant, chief economist for Bright MLS, is less certain about what's coming for mortgage rates.
"While both buyers and sellers welcome lower mortgage rates, it’s not clear whether rates will continue to fall," she said in a statement Thursday. "A weaker economy could lead to lower mortgage rates, but the risks of higher inflation could keep rates elevated. And there are other constraints keeping people out of the market."
The housing market has struggled mightily in recent months. The number of existing homes for sale is hitting records in some areas, lowering prices as buyers show caution about committing. Housing starts and new home sales have fizzled recently, with homebuilders saying buyers are spooked by affordability concerns.
Even if rates keep falling, consumers shouldn't expect major drops, said Justin Benefield, academic director for Auburn University's Winchester Institute for Real Estate Development.
"I think waiting for rates to get back down to even sub-4% is a fool's errand at this point," Benefield said in an interview. "We had gotten so spoiled that now when we see rates at 6.5% or 7%, we think, 'Gosh, that's high.' But historically, it's not."
Daily mortgage rates, often more volatile than weekly ones, also dropped, but just barely, according to Mortgage News Daily. The 30-year, fixed rate averaged 6.55% on Thursday afternoon, down 0.02%, while the 15-year mortgage fell 0.01% to 5.92%.
Mortgage applications rise
Meanwhile, for the week ending Aug. 1, mortgage applications increased 3.1% from one week earlier, according to data the Mortgage Bankers Association released Wednesday. Refinancings rose 5%, the fastest rate in five weeks, and were 18% above the same week a year ago, the trade group said.
An uptick in homes for sale has boosted homebuying, "but on the other hand, recent weakness in the economic environment has deterred some prospective homebuyers," Joel Kan, the group's deputy chief economist, said in a statement.
