Mortgage rates are likely to continue to fall as the Federal Reserve has signaled it will start cutting interest rates. (iStock)
Mortgage rates fell for a second straight week in response to positive economic data, according to Freddie Mac.
According to Freddie Mac’s latest report, the average 30-year fixed-rate mortgage for the week ending June 13 was 6.95%. Primary mortgage market researchThat’s down from the previous week’s average of 6.99% but up from 6.69% a year ago.
The average rate on a 15-year mortgage was 6.17%, down from 6.29% last week and up from 6.10% last year.
The rate cut follows an upbeat inflation report that showed consumer prices softening slightly. On an annualized basis, prices rose 3.3% in May, down from a 3.4% increase last month and below market expectations. On a monthly basis, prices were flat after rising 0.3% in the previous month. Economists surveyed by Dow Jones had expected a monthly increase of 0.1% and an annualized increase of 3.4%.
Inflation continues to moderate toward the 2% target level set by the Federal Reserve. Despite this progress, the central bank intends to keep interest rates high until it has more confidence that inflation is moving in the right direction. On Wednesday, the central bank said it would keep the federal funds rate in a range of 5.25% to 5.5%, the same as it has been since July of last year.
“Mortgage rates continued to decline this week as data emerged suggesting the economy is settling at a more sustainable level of growth,” said Sam Carter, chief economist at Freddie Mac. “Top-line inflation was stable, but housing inflation, which measures rent and homeownership costs, rose, suggesting that affordability remains an obstacle for home-hunting buyers.”
If you are considering buying a home, it is a good idea to compare different lenders to find the best mortgage interest rate. Visit Credible to compare different lender options and choose the one with the best interest rate.
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Mortgage applications on the rise
A slight decline in mortgage rates further encouraged market activity: Mortgage applications rebounded 15.6% in the week ended June 7 on a seasonally adjusted basis. Published data The Mortgage Bankers Association released the data. Without adjustments, the index was up 26% from a week ago.
Mortgage refinancing was up 28% from the previous week and 28% higher than a year ago. Lower mortgage rates prompted a “significant increase” in refinance activity, especially among Veterans Affairs borrowers, who “jumped at the opportunity to get a lower rate,” said Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association.
Mortgage rates have risen largely in tandem with interest rates, and easing interest rates would likely lower borrowing costs. But even without interest rates being cut, mortgage rates have begun to fall and are expected to continue to do so this year, with the MBA predicting they will fall to as low as 6.5%.
“After two weeks of declines, mortgage applications increased by more than 15% as borrowers responded to slightly lower mortgage rates,” said Bob Broeksmit, MBA president and CEO. “Further declines in mortgage rates and reports of rising inventory levels in markets across the country are good news for prospective homebuyers this summer.”
If you want to see if you qualify for a mortgage based on your current credit score and salary, consider visiting Credible, which allows you to compare multiple mortgage lenders at once.
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While lower borrowing costs are good news for homebuyers, they probably won’t be enough to persuade homeowners locked into historically low mortgage rates to move. To make rates actually lower, the Fed would need to cut rates.
Millennials and Gen Xers are seeing the lowest mortgage rates at about 4.0%, according to a recent Freddie Mac survey. report 37% of millennials bought their first home in 2020 and 2021 thanks to low interest rates, while Gen Xers locked in lower interest rates during the same period through refinancing.
“Despite this week’s rate decline, mortgage rates are unlikely to break the lock-in effect at least until the end of the year and possibly until 2025 as long as the Fed sticks to its inflation game,” said Ralph McLaughlin, senior economist at Realtor.com. “The 10-year Treasury yield would need to fall by 150 to 200 basis points before sellers feel comfortable selling their home and buying another. At current spreads, it could take three or four quarter-point rate cuts from the Fed.”
“At the moment, markets are pricing in one rate cut by the end of the year and two to three in 2025,” McLoughlin continued. “So anyone hoping the lock-in effect would be eliminated this year could be in for sore disappointment.”
Homebuyers can find the best mortgage rate by weighing up different options. They can visit online marketplaces like Credible to compare interest rates and choose loan terms.
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