Mortgage Rates Face Biggest Drop in a Year

Is this the moment homebuyers and those saddled with high mortgage rates have been waiting for?

Mortgage rates saw their biggest weekly decline in more than a year, Bloomberg reported. The average on a 30-year, fixed-rate mortgage was 6.35 percent this week, according to Freddie Mac, down from 6.5 percent the week prior.

Borrowing costs have been on a downward trajectory, but a troubling jobs report last week raised the hope of Federal Reserve interest rate cuts in the near future, helping to push mortgage rates down even further; they dropped to as low as 6.27 percent on Monday, according to Optimal Blue.

The average rates haven’t been this low in nearly a year, according to the Wall Street Journal.

In the first month of the year, rates were hovering above 7 percent.

“I expect we’ll be able to get some people off the sidelines,” Neil Bader, national director of retail mortgage lending at Federal Savings Bank, told the Journal.

For the week ending on Sept. 5, mortgage purchase applications jumped 22 percent year-over-year, according to the Mortgage Bankers Association. The volume of purchase applications adjusted seasonally was the highest since July.

Rates aren’t the only thing dogging homebuyers, of course. Home prices are still around record levels across the country, keeping buyers sidelined, so any kind of affordability alleviation is bound to help buyers.

The 10-year Treasury note, which is a closer tracker on how mortgage rates move than interest rates, briefly dipped below 4 percent this week for the first time in months.

Last month, the MBA predicted mortgage rates to be at 6.7 percent by the end of the year and drop to 6.5 percent by the end of next year.

Many analysts believe the number that really moves buyers is the 6 percent threshold, but moving below that may be a pipe dream for now.

— Holden Walter-Warner