Mortgage Rates Hit Lowest Point Since February As Investors Anticipate Fed Rate Cuts

by Piero Cingari Benzinga Staff Writer

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Mortgage rates steadily decline as investors anticipate federal funds rate cuts, yet demand among homebuyers faces challenges.
The average interest rate for 30-year fixed-rate mortgages dropped to 6.62% for the week ending July 19, 2024.
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Mortgage rates are on a steady decline as investors have cemented expectations for upcoming reductions in the federal funds rate, yet mortgage demand continues to depict challenges among homebuyers.

The Mortgage Bankers Association has reported Wednesday that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) dropped by 5 basis points to 6.62% for the week ending July 19, 2024.

This marks the lowest borrowing cost for home purchases since early February 2024.

Despite the decline in mortgage rates, long-term Treasury yields remained stable last week. The 30-year Treasury yield has held steady between 4.20% and 4.25% over the past week.

Market expectations for a 25 basis point rate cut in September hover at 100%, remaining unchanged from the previous week, according to the CME FedWatch Tool.

Bumpy demand for mortgages

Despite the decline in mortgage rates, mortgage demand has shown some setbacks. While the previous week’s drop in mortgage rates spurred a sharp rise in new mortgage and refinancing applications, these trends were more subdued last week.

Mortgage applications fell by 2.2% week-over-week, while the refinance index edged up by 0.3% to 614.9, hitting the highest level since mid-August 2022.

On Tuesday, the National Association of Realtors reported a significant 5.4% decline in existing home sales for June. This drop is likely due to rising buyer apprehensions as median home prices reach new all-time highs.

Jeffrey Roach, chief economist for LPL Financial, commented on the situation, stating, “The low supply of homes and high interest rates have depressed affordability to near-term lows. Because of the tight supply of homes available for sale, median prices continue to rise. We should not expect this dynamic to improve until mortgage rates drop and supply increases.”