Mortgage rates posted their largest weekly decline in a year, sparking a surge in home loan demand as buyers rushed to lock in lower borrowing costs.
“Mortgage rates are headed in the right direction and home buyers have noticed, as purchase applications reached the highest year-over-year growth rate in more than four years,” says Sam Khater, Freddie Mac’s chief economist.
Mortgage applications for home purchases—a gauge of future homebuying activity—climbed 7% from the previous week but were notably 23% higher than the same week a year ago, the Mortgage Bankers Association reported Wednesday.
Mortgage rates fell for the second consecutive week, following lower Treasury yields tied to a weakening labor market, explains Joel Kan, MBA’s economist. “The downward rate movement spurred the strongest week of borrower demand since 2022, with both purchase and refinance applications moving higher,” Kan says.
While mortgage rates remain higher than a year ago, they’ve eased from earlier in the year. For buyers seeking out further relief, more are turning to adjustable-rate mortgages, which start with lower initial rates than the 30-year fixed. “ARM rates were considerably lower than fixed-rate loans, which typically benefits home buyers,” Kan says.
The Federal Reserve meets Sept. 17 and is widely expected to cut its short-term benchmark rate. Although the Fed’s moves don’t directly set mortgage rates, they can influence them.
“As we look at possible reductions in the Fed Funds rate, we could see a domino effect into the mortgage market, but it’s not a one-to-one and it won’t necessarily happen overnight,” Jessica Lautz, deputy chief economist at the National Association of REALTORS®, recently told Real Estate Today.
Still, economists believe that the weakening job market could trigger several rounds of short-term interest rate cuts by the Fed over the upcoming months. “The long-term rates, including mortgage rates, are already falling to near 12-month lows,” Lawrence Yun, NAR’s chief economist, notes in the Economists’ Outlook blog. “That will enlarge the pool of eligible home buyers.”
Elevated mortgage rates have been blamed for curtailing the housing market this spring and summer, but lower mortgage rates could be what the market needs to boost home sales, he adds.
Mortgage Rates This Week
Freddie Mac reports the following national averages with rates for the week ending Sept. 11:
- 30-year fixed-rate mortgages: averaged 6.35%, dropping from last week’s 6.50% average. Last year at this time, 30-year rates averaged 6.20%.
- 15-year fixed-rate mortgages: averaged 5.50%, falling from last week’s 5.60% average. A year ago, 15-year rates averaged 5.27%.
