Mortgage rates fell to lowest level since September 2022

After Weeks of gradual increasesMortgage applications jumped last week as mortgage rates continue to fall ahead of the Federal Reserve’s release expected interest rate cut.

The interest rate on 30-year fixed-rate mortgages fell to 6.15% last week – the lowest since September 2022 and more than a percentage point lower than a year ago, according to Mortgage Bankers Association data released Wednesday. The rate drop pushed the total number of mortgage applications up 14.2% from the previous week.

“Application activity increased significantly last week as market expectations of a Fed rate cut pulled mortgage rates lower,” said Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association, in a statement.

The number of mortgage applications to purchase a home also rose by 5%, which Kan attributed to “improved affordability conditions as a result of lower interest rates and slower home price growth.”

There are initial signs that the situation on the real estate market is easing. Selling new homes in August rose by 14.6% from 677,000 in July to 776,000, the fastest pace of sales since February 2022, according to Mortgage Bankers Association data released Tuesday.

There was almost 36% more houses for sale on a typical day in August compared to the previous year – the highest level since May 2020, Realtor.com (NWS) found.

“With the combination of potentially falling interest rates and the loss of certainty consumers have after the election, I think we will release some pent-up demand and see some existing homeowners enter the market at the end of the year,” said Kendall Bonner, vice president of industry relations at real estate brokerage Xp Realty. (EXPI), told Real estate company Zoocasa.

The Federal Open Market Committee of the US Federal Reserve is is expected to announce its first interest rate cut in over four years on Wednesday. While it is not yet clear whether it will be a 25 or 50 basis point cut, any rate cut is expected to lower mortgage rates and boost home purchases.

“Housing is one of the most interest rate-sensitive sectors of the economy. When the Fed raises interest rates, it is always housing that bears the brunt,” says Austan Goolsbee, president of the Federal Reserve Bank of Chicago. said Quartz last month. “Housing construction will benefit from the easing of interest rates.”

Goolsbee hopes that inflation in the housing market will improve over the next year, but he warned that the higher proportion of 30-year fixed-rate mortgages as opposed to shorter-term contracts will mean that the impact of any improvements will continue to be muted and slower to materialise.

But for now Costs still seem too high to create significant movement in the market. The median sales price of a home in August was $433,229, according to the latest Redfin (RDFN) Data available. And in the second quarter of this year, the potential average monthly housing payment was about $3,500 – or 49% of the median U.S. income for the first-time homebuyer age group, according to Estimates by NerdWallet (NRDS).

“I think a lot of homeowners have a lot of equity right now and are also taking advantage of very low interest rates,” Bonner said. “Unless the reason for moving is very big, there’s no reason to do anything until conditions are more favorable.”