This fall could be a good time to buy a house: The reason why mortgage rates are dropping
Mortgage rates just saw their sharpest drop this year as Treasury yields fell, creating new opportunities for buyers this fall.
Looking to buy a house in the United States? Now could be the right time to strike, with mortgage rates finally tumbling.
The 30-year fixed mortgage rate dropped from 6.50% to 6.35% last week, representing the sharpest weekly decline this year. Those figures are expected to motivate buyers who have been sidelined by high borrowing costs to re-enter the housing market.
Why mortgage rates are falling
Mortgage rates closely follow the 10-year Treasury yield, which fell to its lowest level since April, pushing borrowing costs down.
Additionally, weak labor market data has indicated that the U.S. economy is weakening more than had been anticipated.
While that may be bad news in many ways, investors believe the Fed may cut interest rates to support growth. The Fed doesn’t directly set mortgage rates, but expectations about its next moves strongly influence bond markets, making Treasury bonds more attractive and lowering yields even further.
A psychological shift for buyers
That shift in rates may already be having a psychological effect. According to Lisa Sturtevant, chief economist at Bright MLS, a drop below 6.5% may encourage buyers to act, inspired by a sense of urgency in the market, even if affordability isn’t perfect.
What lower rates mean for affordability
Home prices remain high, and insurance and other costs are still elevated, while mortgage rates can still be unpredictable. However, even small rate reductions can save buyers money each month and over the life of a loan. Mortgage applications recently reached a three-year high, signaling growing demand and giving sellers more reason to negotiate or offer incentives.
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