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The average rate on a 30-year fixed mortgage dropped significantly to 6.4% on Friday, according to Mortgage News Daily. This is the lowest level since April 2023. The 15-year fixed mortgage rate fell to 5.89%, its lowest since early May 2023. This decrease follows a weaker-than-expected monthly employment report, which caused a rapid decline in bond yields. Mortgage rates generally follow the yield on the 10-year U.S. Treasury.
Matthew Graham, chief operating officer at Mortgage News Daily, attributed the drop to Federal Reserve Chair Jerome Powell’s comments about potential “multiple cuts” in 2024 and the recent jobs report. Graham noted that if future inflation and employment reports don’t contradict the current data, the Fed might initiate a rate cut cycle with a sense of urgency.
The 30-year fixed mortgage rate began the week at 6.81%, making the recent decline quite dramatic. The rate reached a high of 7.52% in late April, leading to a slowdown in home sales due to high rates, high home prices, and limited supply. Although supply has improved, home prices remain elevated.
The reduction in mortgage rates has notably improved affordability. For example, in April, a buyer of a $400,000 home with a 20% down payment faced a monthly payment of about $2,240, excluding insurance and property taxes. With the current lower rates, the payment would be approximately $2,000. This drop also means that more buyers may qualify for mortgages.
Mortgage applications to purchase homes are currently about 15% below last year’s levels, according to the Mortgage Bankers Association. The recent drop in rates could boost demand for both home purchases and refinances. Mike Fratantoni, chief economist for the Mortgage Bankers Association, suggested that the market is adjusting ahead of the Fed, which could lead to increased home buying and refinancing activity.