The downward movement in mortgage rates over the past few months accelerated last week as a cooler-than-expected jobs report and indications of a Federal Reserve rate cut led to a steep drop in loan pricing.
At HousingWire‘s Mortgage Rates Center on Tuesday, the 30-year conventional loan rate averaged 6.8% — a new low point for 2024 that was just below the 6.83% figure to start the year. Rates have been above 7% for much of the past six months, contributing to a tepid spring and summer of home sales, but they have steadily decreased since peaking above 7.5% in early May.
Depending on the loan scenario, originators across the country are offering even lower prices to borrowers. HousingWire interviewed several mortgage professionals on Monday who said that rates for government loans were in the high 5% to low 6% range, while those for conventional mortgages were in the low-to-mid-6s. Several reported that mortgage rates rose again on Tuesday due to weaker mortgage-backed securities prices. Quotes vary based on borrower credit scores, lender points and other factors.
On Monday, turmoil for international stock markets were received as good news for the U.S. housing and mortgage markets, even as stock prices for some major real estate and mortgage companies took a hit. Bank of America projected more than 100 basis points (bps) of rate cuts before the end of the year as the risk of a recession appears to be rising.
The recent decline in rates — and expectations for more — are fueling optimism for a potential renaissance in home purchase and refinance lending. At United Wholesale Mortgage, for example, CEO Mat Ishbia said Tuesday that the company is selling some of its mortgage servicing rights with higher coupon rates as it looks to deleverage its balance sheet and invest in origination opportunities.
The CME Group‘s FedWatch tool currently shows a 100% chance of a rate cut following next month’s Fed meeting. Sixty-three percent of analysts believe there will be a cut of 50 bps, with 37% expecting a cut of 25 bps. The federal funds rate has not moved from its current range of 5.25% to 5.5% since July 2023.
Other market observers cautioned that even though a Fed rate cut in September seems all but certain, mortgage rates don’t always move in tandem with changes in the federal funds rate.
“Mortgage rates aren’t going to change based on a Fed cut,“ Melissa Cohn, a regional vice president at William Raveis Mortgage, said in a statement. “Your home equity rate will drop. Your student loans, car loans, all those rates will drop every time the Fed cuts rates, but mortgage rates are tied to the bond market, and the bond market is more affiliated with the rate of inflation and bad economic data than it is to the Fed funds rate.”
In commentary published Monday, Moody’s analyst Nick Villa wrote that a September rate cut will not be enough to “relieve the housing affordability crisis.“
“Presumably, even with the first interest rate cut of this hiking cycle in September, the federal funds rate would still be in restrictive territory with additional cuts needed to help restore the housing market to a more balanced equilibrium,“ Villa said.
