Mortgage rates in the US extended their decline, reaching the lowest point in almost a year.
The average for 30-year, fixed loans was 6.26%, the lowest since early October and down from 6.35% last week, Freddie Mac said in a statement.
Borrowing costs have fallen significantly enough in the past couple of months to spur a surge in refinancing, with the Mortgage Bankers Association’s measure of activity jumping to the highest level since early 2022.
Lower rates could help ease affordability challenges for house hunters, but may also come at the cost of greater economic uncertainty, which will hold back some would-be buyers.
Signs of weakening in the labor market largely drove the Federal Reserve’s decision to cut interest rates by a quarter-point Wednesday. It was the central bank’s first reduction in nine months, and officials projected two more to come this year.
The impact on the housing market may be limited. Mortgage rates aren’t likely to fall much further on the news because the Treasury yields that guide them have already been on the decline for the past month, according to Orphe Divounguy, senior economist at Zillow.
If today’s “somewhat lower rates stick, that could push some shoppers on the margins to buy,” he said. “But sellers may not be so moved.”
Many homeowners have been staying put because their current loans are so much cheaper than what they’d be able to get now. More than 80% of borrowers still hold mortgages below 6%, reducing their incentives to sell or move, according to Realtor.com.
Gopal writes for Bloomberg.