WASHINGTON, Sept 19 (Askume) – U.S. mortgage rates fell this week to their lowest level in more than a year and a half andIt may fall further after the Federal Reserve cut interest rates for the first time since 2020.
Mortgage financier Freddie Mac reported Thursday that the average interest rate on the popular 30-year fixed-rate mortgage fell to 6.09% from 6.20% last week, the lowest level since February 2023. The average for the same period last year was 7.19%.
The average 15-year fixed-rate mortgage rate fell to 5.15% from 5.27% last week, the lowest level since February 2023. The average was 6.54% a year ago.
The Federal Reserve on Wednesday cut its benchmark overnight interest rate by 50 basis points to 4.75%-5.00%.
While low mortgage rates may encourage more homeowners to put their homes on the market, low borrowing costs are unlikely to have a significant impact on the housing market this year. Most homeowners have mortgage rates below 4%, and the so-called “rate lock” has reduced supply in the secondary housing market. However, low borrowing costs may increase demand more than supply, keeping home prices high.
Mortgage financier Fannie Mae predicted Wednesday that sales of existing homes this year will be the lowest since 1995, citing affordability challenges.
Fed Chairman Powell told reporters on Wednesday, “The real problem with housing is that we don’t have enough housing, and that will remain the case.” He added, “The Fed doesn’t really care about it. We normalize interest rates, you’ll see the real estate market normalize as well.”
However, Fitch Ratings said on Thursday that 30-year fixed mortgage rates are unlikely to fall below 5.0% before 2027.
Olu Sonora, head of US economic research at Fitch Ratings, said 30-year fixed-rate mortgages and US 10-year Treasury bond yields are already priced in half a percentage point higher than the usual Fed rate cuts. The 30-year fixed-rate mortgage follows the 10-year Treasury note.
“Even with further rate cuts, a decline in the 30-year mortgage rate to around 5.0% is contingent on the 10-year Treasury spread returning to the pre-pandemic 10-year average of 1.8 percentage points,” Sonora said. “There is little room for 10-year Treasury yields to fall further following interest rate cuts due to easing monetary policy.”
