While there’s no direct correlation between interest rate cuts and mortgage rate dips, per se, both segments saw some positive news this week, with the Fed signaling Wednesday that there will likely be one more rate cut this year, and the 30-year fixed-rate mortgage (FRM) averaging its lowest point since February, according to the latest Primary Mortgage Market Survey® (PMMS®) from Freddie Mac, release Thursday.
Average rates hit 6.73% this week, down from last week’s 6.78%, the third decline in the past four weeks, Freddie Mac reported.
“Mortgage rates declined to their lowest level since early February,” said Sam Khater, Freddie Mac’s chief economist. “Expectations of a Fed rate cut coupled with signs of cooling inflation bode well for the market, but apprehension in consumer confidence may prevent an immediate uptick as affordability challenges remain top of mind. Despite this, a recent moderation in home-price growth and increases in housing inventory are a welcoming sign for potential homebuyers.”
This week’s numbers:
- The 30-year FRM averaged 6.73% as of August 1, 2024, down from last week when it averaged 6.78%. A year ago at this time, the 30-year FRM averaged 6.90%.
- The 15-year FRM averaged 5.99%, down from last week when it averaged 6.07%. A year ago at this time, the 15-year FRM averaged 6.25%.
Bright MLS Chief Economist Dr. Lisa Sturtevant commented:
“Some prospective homebuyers are holding out for lower mortgage rates. The Federal Reserve will almost certainly cut rates in September—the first cut since 2020. However, there is no direct “cause-and-effect” relationship between the Fed rate cuts and a drop in mortgage rate, and as a result, we should not expect a significant drop in mortgage rates following the Fed’s September meeting. In fact, expectations about a September rate cut are already baked in which is why we’re already starting to see mortgage rates start to come down.”
Sturtevant added, “Mortgage rates should continue to fall throughout the second half of the year, ending the year with an average rate on a 30-year fixed rate mortgage at about 6.4%. Rates will continue to fall in 2025 though it is likely that they will remain above 6% through the end of next year.”
Realtor.com Economist Jiayi Xu, commented:
“In July’s FOMC meeting, the Fed acknowledged “some further progress” toward the 2% inflation goal while keeping the short-term policy rate unchanged at a range of 5.25 to 5.5%. While investors are having a strong consensus around at least one quarter point rate cut by September, the Fed’s statement reinforced the upcoming inflation and employment data will keep guiding its decision.
“The housing market has been cooling in recent weeks, with stable prices, increasing listings, and longer time on market. However, as home prices hover at or near record highs, affordability continues to be the top challenge. While the potential rate cut in September will be a good start to bring the rate down, subsequent drops in mortgage rates may not be as significant as many anticipated because the market is already pricing in rate cuts and such expectation is reflected by recent rate drops.”
