Mortgage rates fell again last week, this time to their lowest level since April 2023

Recent mortgage rate trends

• Significant decline: Mortgage rates fell again last week, reaching their lowest level since April 2023, with the average 30-year rate at 6.57% as of August 19, 2024
• Gradual decrease: The recent mortgage rate decline in 2023 has been ongoing for months, though rates are still significantly higher than the pandemic-era lows of below 3%
• Market expectations: The recent mortgage rate decline may already be priced into the market, potentially limiting further significant decreases

Factors influencing the rate decline

Economic indicators

• Cooling inflation: As inflation continues to move closer to the Fed's 2% target rate, mortgage rates fell again last week
• Labor market softening: A softening labor market contributes to the recent mortgage rate decline in 2023
• Unemployment: Increasing unemployment rates may signal further drops in mortgage rates, potentially reaching their lowest level since April 2023

Federal Reserve policy

• Potential rate cuts: Experts predict the Federal Reserve will likely cut short-term interest rates in September 2024, potentially leading to mortgage rates falling again throughout the fall and into 2025
• Current benchmark rate: The Fed's benchmark rate is currently near a 23-year high, but potential cuts could lead to lowest mortgage rates since April 2023
• Indirect influence: While mortgage rates are not directly tied to the Fed's benchmark rate, changes in this rate can influence overall market conditions

Bond market dynamics

• 10-year Treasury yield: A recent drop in the 10-year treasury rate led to a corresponding decrease in mortgage rates, contributing to mortgage rates falling again last week
• Mortgage-backed securities: Investor behavior in mortgage-backed securities (MBS) significantly influences mortgage rates
• Interest rate risk: When market interest rates rise, the prices of fixed-rate bonds fall, affecting mortgage rates

Forecasts for fall 2024

• Potential range: Experts predict mortgage rates could reach 6-6.5% by fall 2024, potentially the lowest mortgage rates since April 2023
• Gradual decline: Rates are expected to continue modestly declining in a "two-steps-down, one-step-up pattern"
• Political factors: The upcoming 2024 election may lead to economic and political uncertainty, causing mortgage rates to fluctuate

Impact on the housing market

• Slowing activity: Higher mortgage rates have led to slowing mortgage origination activity and total home sales, reaching the slowest annual pace since 2011
• Multifamily construction: Multifamily construction continues to slow, with permits trending downward
• Origination forecasts: Fannie Mae forecasts purchase mortgage originations of $1.3 trillion in 2023 and $1.4 trillion in 2024

FAQ

What caused mortgage rates to fall to their lowest level since April 2023?

Mortgage rates fell again last week due to cooling inflation, potential Federal Reserve rate cuts, and changes in bond yields. These factors contributed to the recent mortgage rate decline in 2023, bringing rates to their lowest level since April 2023.

How low did mortgage rates fall in the recent decline?

As of August 19, 2024, the average 30-year mortgage rate reached 6.57%, marking the lowest mortgage rates since April 2023. This represents a significant decline from previous months and continues the trend of falling rates observed throughout 2023.

Will mortgage rates continue to decline in 2024?

Experts predict that the recent mortgage rate decline in 2023 may continue into fall 2024, with rates potentially reaching 6-6.5%. However, factors such as economic indicators, Federal Reserve policy, and political events like the 2024 election could influence rate movements.

How has the recent mortgage rate decline affected the housing market?

The recent mortgage rate decline in 2023 has slowed mortgage origination activity and total home sales. However, as rates continue to fall to their lowest level since April 2023, it may create opportunities for homebuyers and those looking to refinance their existing mortgages.

What factors should I consider when monitoring mortgage rates in the coming months?

To stay informed about the lowest mortgage rates since April 2023, pay attention to inflation trends, Federal Reserve policy decisions, changes in bond yields, and overall economic indicators. These factors will likely influence whether mortgage rates fall again in the near future.