The mortgage market is showing signs of life as the Federal Reserve’s potential rate cuts come into view.
For the week ending July 12, 2024, the average interest rate on 30-year fixed-rate mortgages with conforming loan balances dropped to 6.87%, a 13 basis point decrease from the previous week’s 7%.
This marks the most significant reduction in borrowing costs in about four months and brings rates to their lowest point since early March.
What’s driving this change? It’s largely due to growing expectations of Fed rate cuts and a decline in 30-year Treasury yields.
These yields, which serve as a benchmark for long-term mortgage rates, have fallen by around 30 basis points since the start of the month, settling at 4.37%.
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The market’s confidence in an upcoming rate cut is growing.
The CME FedWatch Tool shows that expectations for a 25 basis point cut in September have skyrocketed to 95.3%, as of July 17th, up from just 60% a month ago.
This rate decrease has had a noticeable impact on mortgage demand.
Applications for both new mortgages and refinancing of existing mortgages saw significant increases last week.
MBA data shows that overall mortgage applications in the U.S. jumped by 3.9% in the third week of July, rebounding from two weeks of declines to post the largest increase in a month.
Refinancing applications, which tend to be more sensitive to weekly rate fluctuations, saw an even more dramatic rise.
They increased by 15% from the previous week, reaching their highest level in two years.
This uptick in mortgage activity could be a positive sign for the housing market, which has been under pressure from high interest rates.
If rates continue to fall, it could make homeownership more affordable for many Americans and potentially stimulate the real estate sector.
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However, it’s important to note that while this decrease is significant, mortgage rates are still considerably higher than they were a few years ago.
