The national average on the 30-year, fixed-rate mortgage inched down to 6.86% from 6.87% a week prior, according to Freddie Mac’s report published on Thursday. Rates have declined for four consecutive weeks and are at the lowest since April.
The housing market has been sluggish — many home sellers have stayed put to keep their favorable mortgage rates, while buyers facing affordability challenges retreated from the market. However, both inventory and affordability could ease up as rates are projected to decline for the remainder of the year.
“We are probably going to see rates decline slowly from here through the end of the year,” Joel Kan, deputy chief economist for the Mortgage Bankers Association, told Yahoo Finance. “And if our forecast is right… that helps potential homebuyers.”
Read more: Mortgage rates today, June 27, 2024: The mortgage rates seesaw continues
Projected rate decline
The Mortgage Bankers Association is currently predicting the Federal Reserve will cut its benchmark federal funds rate twice in 2024, lowering mortgage rates to around 6.5% by the end of this year.
“I think the odds are still fluctuating, but that’s the base case,” Kan said, citing improving inflation data as the primary driver for potential falling interest rates. Annual inflation eased in May, with consumer prices rising 3.3% year over year.
Wells Fargo’s June economic summary forecasted mortgage rates would reach 6.5% by year-end, while Fannie Mae expects them to land at 6.7%.
A nearly 40-basis-points mortgage-rate decline per the MBA’s forecast could “change the math drastically” for homebuyers, Kan said. It would help them qualify for a bigger loan or reduce their monthly mortgage payments. Since the Fed started raising rates in 2022, many buyers pulled back from the market as they waited for a more affordable environment.
At the current average rate, a homebuyer would pay about $1,600 monthly on a $300,000 home with a 20% down payment, according to the Yahoo Finance mortgage calculator. Buyers would pay almost $100 less a month if mortgage rates were to decline to 6.5%.
Financing demand stayed flat last week. The MBA’s Market Composite Index, which tracks weekly mortgage loan application volume, increased by less than 1%. New mortgage application activity increased by 1% but remained 13% lower than the same week last year. Refinancing activity remained the same.
“As we go forward, if we continue to see the improvement in the inflationary picture,” Kan said, “[there is] more expectations that rates will come down.”
Read more: Mortgage rates hover just below 7% — is this a good time to buy a house?
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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