Zillow reports the average 30-year mortgage now has a 5-handle
of ConsumerAffairs
Mortgage rates are finally falling. All it took was a scary stock market sell-off, caused by a weak July employment report.
How are the two events connected? The key is the yield of the 10-year Treasury bond. Amid the Wall Street carnage, the yield the interest rate paid to bondholders dropped well below 4%. Since mortgage rates are linked to the yield on that bond, mortgage rates are also falling.
Freddie Mac will report the average rate on the 30-year fixed-rate mortgage on Thursday, but in what may be a preview, Zillow reports its data show that the rate on that popular mortgage has dropped 20 basis points from last week to 5.92%, the first time in over a year the rate has fallen below 6%.
This change has occurred even though the Federal Reserve has not yet begun cutting the federal funds interest rate, something it is expected to do next month. Though not directly tied to mortgage rates, a lower federal funds rate could contribute to lower mortgage rates.
Mortgage rates have stymied the housing market
Mortgage rates of around 7% have significantly slowed the housing market, eroding home affordability. Zillow recently crunched some numbers that dramatically reveal just how big a burden it is.
To be able to afford the monthly payment on the median-priced home costing $360,000, a middle-class household would have to come up with a six-figure down payment - $127,750 far more than the typical 20% down payment. That much would be needed to keep the monthly payment at 30% of income or less.
In July, Shmuel Shayowitz, president of Approved Funding, correctly predicted the decline in mortgage rates.
I believe that we will see mortgage rates in a narrow range but trickling lower for the remainder of 2024, he told ConsumerAffairs. I anticipate that mortgage rates will be at least 25 basis points lower than current levels before the end of the year.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-08-06 19:56:16
