By Don DeBat

18-Aug-24 – Home loan interest rates – on a roller coaster ride for more than two years – finally are coming down from lofty levels.

Average benchmark 30-year fixed-rate mortgage rates fell a quarter of a percentage point on August 8 to 6.47 percent nationwide, the lowest level in more than a year, reported Freddie Mac’s Primary Mortgage Market Survey. They increased just 0.02 percent on August 15 to 6.49 percent.

The popular 30-year fixed rates fell on August 8 from 6.73 percent a week earlier. A year ago, the 30-year fixed-rate loans averaged 6.96 percent. Less than a year ago, on October 26, 2023, the 30-year fixed loan average skyrocketed to 7.79 percent.

“Home buyers who were priced out a few months ago should re-check whether they can enter the market if they have secure jobs,” said Lawrence Yun (right), Chief Economist for the National Association of Realtors.

Interest charges on 15-year fixed loans averaged an affordable 5.63 percent on August 8, down from 5.99 percent a week earlier, and were up just 0.03 percent on August 15 to 5.66 percent. A year ago, 15-year fixed mortgages averaged 6.34 percent. On October 26, 2023, the 15-year fixed-loan average zoomed to 7.03 percent.

Analysts say mortgage rates have steadily fallen over the past several weeks since reaching a 2024 peak of 7.22 percent in early May.

“Mortgage rates plunged...to their lowest level in over a year following the likely overreaction to a less-than-favorable employment report and financial market turbulence for an economy that remains on solid footing,” said Sam Khater (left), Freddie Mac’s Chief Economist, on August 8.

“The decline in mortgage rates does increase a prospective home buyer’s purchasing power and should begin to pique interest in making a move,” said Khater.

In addition, Khater noted that the drop in rates is already providing some existing homeowners the opportunity to refinance. The refinance share of market mortgage applications reached nearly 42 percent, the highest level since March 2022.

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who place a 20 percent down payment and have excellent credit.

Fed increased rates to tame inflation

The interest rate rise over the past two-plus years was a direct result of the Federal Reserve’s aggressive interest rate hikes intended to tame soaring inflation numbers not seen in 40 years. The Fed raised its key benchmark lending rate to a range of 5.25 to 5.50 percent, the highest level since 2007.

Based on aggressive moves by the Fed, mortgage analysts earlier predicted 30-year fixed home loans could rise to the 8 percent level. Rates have not hit that level since August 11, 2000, more than 24 years ago.

Now, Wall Street analysts are currently betting that the Fed will cut rates aggressively this year. They forecast a large half-percentage-point rate cut next month, followed by two quarter-point cuts by the end of the year. Those moves could push mortgage rates down to an affordable 5.5 percent for the spring 2025 home-buying season.

Good luck, loan hunters! You likely will need it.