Is relief for mortgage borrowers in sight?
US mortgage rates have declined for the fourth consecutive week, offering slight relief for prospective homebuyers amid persistent affordability challenges.
Freddie Mac has reported that the average rate for a 30-year fixed mortgage fell to 6.77%, down from 6.81% the previous week. This marks the lowest level since early May, a report from Bloomberg highlighted. The average rate for 15-year loans also dropped to 5.89%, from 5.96%.
The decrease in borrowing costs follows a drop in Treasury yields, as geopolitical tensions eased following a ceasefire between Iran and Israel. In addition, two Federal Reserve officials expressed support for interest rate cuts as early as July, contributing to expectations of a more accommodating monetary policy in the coming months.
Stable but stubbornly high
Despite the modest decline, mortgage rates remain stuck in the high 6% range, limiting any substantial improvement in housing affordability.
“Borrowers should find comfort in the stability of mortgage rates, which have only fluctuated within a narrow 15-basis point range since mid-April,” said Sam Khater, chief economist at Freddie Mac.
A report from Yahoo Finance noted that Federal Reserve chairman Jerome Powell testified before Congress this week, stating that the Fed is not rushing to cut rates. Markets anticipate a potential reduction by September, according to CME FedWatch data.
Mixed signals in the housing market
The persistent rate environment has kept housing activity subdued. While home shoppers now benefit from a broader selection of listings and improved bargaining power, affordability remains a key concern.
“Slightly lower mortgage rates toward the end of the year could further improve affordability, but significant improvements appear unlikely,” said Kara Ng, senior economist at Zillow Home Loans.
Redfin data showed that in the four weeks through June 22, new listings fell in 20 of the 50 largest metro areas compared to a year earlier. Purchase contracts declined 2.3%, the steepest drop in three months.
Overall mortgage outlook
Mortgage application activity remains flat. According to the Mortgage Bankers Association, new home purchase applications were little changed last week, while refinance applications edged up 3%.
Economists at the Mortgage Bankers Association expect mortgage rates to end the year around 6.7%, while Fannie Mae forecasts a gradual drop to 6.5%. Still, both outlooks suggest only incremental changes for homebuyers in the near term.
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