Mortgage rates dropped to the lowest in two years, helping push buyers back into the housing market.
The average for a 30-year, fixed loan was 6.08%, down from 6.09% last week, Freddie Mac said in a statement.
Borrowing costs have fallen in five of the past six weeks, spurring more buyers to jump in from the sidelines. A measure of contract signings to buy previously owned homes climbed 0.6% in August, and a weekly measure of purchase applications has risen in recent weeks. An increasing amount of owners are also seeking to refinance mortgages, with rates inching closer to 6%.
“Given the downward trajectory of rates, refinance activity continues to pick up, creating opportunities for many homeowners to trim their monthly mortgage payment,” Sam Khater, Freddie Mac’s chief economist, said in the statement.
Earlier this month, the Federal Reserve’s first interest rate cut in more than four years helped push borrowing costs lower. Mortgages typically track the yield on a 10-year US Treasury.
Buyers waiting for mortgage rates to drop much more may be disappointed. The market has already been pricing in more cuts from the Fed, meaning mortgage rates will likely stabilize in the 6% to 6.2% range through the rest of the year, according to Realtor.com Economist Jiayi Xu.
For now, monthly housing payments are lower in some major metro areas thanks largely to the decline in borrowing costs. The typical monthly payment in San Jose fell more than $2,000 from its springtime peak through mid-September, according to Redfin Corp.
“We’re in a sweet spot for buyers. This may be close to the bottom for housing payments, especially in expensive and desirable coastal markets,” said Chen Zhao, a Redfin economist. “Mortgage rates have fallen about as much as they’re going to fall, and we’re already seeing demand surge back. If supply doesn’t increase as much as demand, price growth is likely to rise.”
This article was provided by Bloomberg News.