Mortgage rates just fell to their lowest level of the year, giving sidelined homebuyers a glimmer of hope in a brutal housing market.
Freddie Mac reported Thursday that the average rate on the benchmark 30-year fixed mortgage dropped to 6.58%, down from 6.63% last week. By comparison, the rate sat at 6.49% one year ago.
“Mortgage rates fell to their lowest level since October,” said Sam Khater, Freddie Mac’s chief economist. “Purchase application activity is improving as borrowers take advantage of the decline in mortgage rates.”
A Temporary Dip in Borrowing Costs
On October 24, 2024, the average rate for a 30-year mortgage was 6.54%. This week’s figure marks only a slight improvement from that level, but it’s still a meaningful drop for buyers struggling with affordability.
Meanwhile, the 15-year fixed mortgage rate fell to 5.71%, down from 5.75% a week ago. A year ago, that loan averaged 5.66%.
A Market Still in Crisis
The housing market, however, remains locked in an affordability crunch. According to Harvard’s Joint Center for Housing Studies, high home prices and elevated borrowing costs have pushed homebuying activity to its lowest point since the mid-1990s.
To make matters worse, homeowners and landlords are grappling with climbing insurance premiums and property taxes. Renters aren’t faring much better. The Harvard report noted that the burden of rising rent has left “more people than ever cost burdened, and has contributed to a sharp rise in homelessness.”
Bessent: Fixing Housing is a Top Priority
Treasury Secretary Scott Bessent acknowledged the severity of the crisis in an interview Thursday.
“We are really going to work on this housing affordability crisis. That’s one of my big projects for the fall,” Bessent told.
A Sluggish Summer for Sales
Normally, the housing market heats up from May through August, with June typically being the busiest month for transactions. But this year, activity has stalled.
Realtor.com senior economist Joel Berner told that both existing and new home sales have been “sluggish.”
While last week’s dip in mortgage rates may have offered some encouragement, Berner cautioned that a broader rebound in demand could take time. Many buyers remain cautious, waiting for more substantial relief before jumping back into the market.
