Borrowing costs are down again, offering another summer sweetener to a housing market struggling with affordability challenges and soft demand.
The 30-year, fixed-rate mortgage averaged 6.67% as of Thursday, down from 6.77% last week and 6.95% during the same week of 2024, according to mortgage giant Freddie Mac. It was the fifth consecutive decline and the largest weekly drop since March in what the mortgage giant says is "the product of choice for nearly 90% of homebuyers because of its affordability and flexibility."
The 15-year, fixed-rate mortgage averaged 5.80%, lower than last week's 5.89%. A year ago, the rate averaged 6.25%.
"This is a really good signal for the market," Sean Salter, a finance professor at Middle Tennessee State University in Murfreesboro, told Homes.com. "Rates probably are not going to go super low, but at this point, anything is better than nothing."
Sales of new and existing homes have been sluggish recently, at a time when the residential real estate market is usually buzzing with consumers looking to buy and settle before the next school year begins.
Elevated mortgage rates affect monthly payments, causing some prospective buyers to hold off, analysts say. As a result, homes in Florida, Texas and other states are taking longer to go under contract and trade hands.
The Freddie Mac report comes on the heels of surprisingly favorable unemployment figures released earlier Thursday from the U.S. Bureau of Labor Statistics. It snaps a streak of 11 consecutive weeks in which the 30-year rate average ping-ponged between 6.76% and 6.89%.
"Declining mortgage rates are encouraging and, while overall affordability challenges remain, we are seeing more sellers enter the market giving prospective buyers an advantage,” said Sam Khater, Freddie Mac’s chief economist, in a statement.
Last month, the Federal Reserve decided to keep interest rates unchanged. The central bank doesn’t set mortgage rates, but its interest rate policy tends to affect investor behavior, and that dictates movement in the mortgage market.
As for daily rates, the 30-year, fixed-rate mortgage rate on Thursday inched higher to 6.75% and the 15-year, fixed-rate edged up to 5.98%. The rates have mostly been falling since the third week of May.
Excluding the past several days, these rates would still be the lowest since early April, according to Matthew Graham, chief operating officer at Mortgage News Daily.
"In other words," he said in a post on Wednesday, "we're still in solid shape in the bigger picture."
Meanwhile, for the week ending June 27, mortgage applications increased 2.7% on a seasonally adjusted basis from the prior week, according to the Mortgage Bankers Association trade group. Refinancings increased 7% from the previous week and 40% from the same week one year ago.
"Purchase activity was essentially flat over the week, as overall uncertainty continues to hold homebuyers out of the market," said Joel Kan, MBA’s deputy chief economist, in a statement. "However, purchase activity still remains 16% higher than last year’s pace."