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Would-be home buyers and homeowners looking to refinance their mortgages got a rare break this week after months of stubbornly high borrowing costs.
The 30-year fixed mortgage rate averaged 6.58% for the week ending August 14, the lowest level since October, according to data released Thursday from Freddie Mac.
The drop in borrowing rates comes as investors increasingly expect the Federal Reserve to cut its interest rates in September after recent data showed the US job market slowed sharply in July. The jobs report also showed downward revisions to previously reported employment numbers, indicating that the economy may be slowing more than expected.
“The recent slide in mortgage rates was triggered by July’s employment report from the Bureau of Labor Statistics,” said Kara Ng, a senior economist at Zillow Home Loans. “Significant downward revisions to prior months’ data reshaped the narrative of a robust labor market, revealing one that is cooling faster than previously thought.”
While the Fed doesn’t directly set mortgage rates, its actions can affect the 10-year Treasury yield, the key benchmark that influences home borrowing costs.
Mortgage rates have spent most of the year stuck just under 7%, sidelining many would-be buyers and slowing down the real estate market. Homes are lingering on the market longer, and with bidding wars less common, more sellers are offering price cuts or other incentives.
That means the power in many cities is shifting to buyers, according to Zillow data that measures which US markets are favorable to buyers and which are favorable to sellers.
It may be too soon to tell whether a drop in mortgage rates will entice more buyers into the market, reheating competition for homes for sale.
However, Sam Khater, Freddie Mac’s chief economist, said in a statement he’s seen “purchase application activity is improving as borrowers take advantage of the decline in mortgage rates.”
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