by Two Sisters Collective
Mortgage rates have fallen rapidly in recent months, offering homebuyers an opportunity for some borrowing relief if they move ahead with the big-ticket purchase.
The average interest rate on a 30-year fixed mortgage stands at 6.35%, dropping from 6.5% over the week ending on Thursday, which amounted to the largest one-week drop in mortgage rates this year, FreddieMac data shows. As recently as January, the average 30-year fixed mortgage rate exceeded 7%.
The sharp drop in mortgage rates owes in part to government data showing a significant decline in hiring, which has heightened expectations that the Federal Reserve will slash interest rates and in turn put downward pressure on borrowing costs, some analysts told ABC News. Each percentage point decrease in a mortgage rate can save thousands or tens of thousands in additional cost each year, depending on the price of the house, according to Rocket Mortgage.
“This is a significant drop,” Ken Johnson, a real estate economist at the University of Mississippi, told ABC News. The trend poses a quandary for homebuyers, the experts added: Do buyers move quickly to snap up a favorable mortgage or wait to see if interest rates fall even further?
Mortgage rates closely track the yield on a 10-year Treasury bond, or the amount paid to a bondholder annually. Bond yields are shaped in part by expectations of the benchmark interest rate set by the Fed, some experts said.
Five meetings and nine months have elapsed since the Fed last adjusted interest rates. The federal funds rate stands between 4.25% and 4.5%, preserving much of a sharp increase imposed in response to a pandemic-era bout of inflation.
That posture is expected to shift, however. Fed Chair Jerome Powell recently hinted at the possibility of an interest rate cut, appearing to indicate greater concern for flagging employment growth than for rising prices.
Investors peg the chances of three quarter-point rate cuts by the end of this year at about 76%, according to CME FedWatch Tool, a measure of market sentiment.
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