Housing News

Mortgage Rates Came Down. Will They Keep Falling?

Mortgage interest rates ticked down slightly, making purchasing a home a little bit more affordable for buyers.

Rates averaged 6.56% for 30-year, fixed-rate loans in the week ending Aug. 28, according to Freddie Mac data. That’s a little lower than the previous week, when they were 6.58%.

“Mortgage rates are at a 10-month low,” said Freddie Mac Chief Economist Sam Khater in a statement.

However, rates are still higher than this time last year, when they averaged 6.35%.

These higher rates are keeping the number of home sales low as shoppers struggle to afford a home when home prices and mortgage rates remain high.

The median list price was $439,450 in July, up 0.5% year-over-year, according to Realtor.com data.

“Purchase demand continues to rise on the back of lower rates and solid economic growth,” said Khater. “Though many potential homebuyers still face affordability challenges, consistently lower rates may provide them with the impetus to enter the market.”

Mortgage rates are ticking down because the U.S. Federal Reserve is expected to lower interest rates at its September meeting. The two rates are separate, but the Fed’s policy influences mortgage rates.

If the Fed signals that a rate cut might be coming, mortgage rates are likely to decline. However, they may not continue to fall unless the Fed indicates that more rate cuts are on the horizon. Even then, there may not be a substantial drop.

“With the Fed widely expected to cut the federal funds rate…many prospective homebuyers are hopeful for a bigger drop in mortgage rates,” said Bright MLS Chief Economist Lisa Sturtevant in a statement. The multiple listing service covers the mid-Atlantic region. “Unfortunately, they are going to be disappointed.”

Even if rates don’t continue to fall, buyers may still be able to benefit from an uptick in listings to choose from and sellers cutting prices to heat the competition.

About one in five, or 20.6%, of all homes for sale experienced a price cut in July, according to Realtor.com.

“There are many markets where homebuyers can definitely take advantage of growing [housing] inventory, slower price growth, and more opportunities to negotiate with sellers,” said Sturtevant.