In anticipation of a rate cut by the U.S. Federal Reserve, mortgage rates in the U.S. fell to their lowest level since September 2022 last week, triggering a flood of home purchase and refinancing applications.
The contract interest rate on a 30-year fixed-rate mortgage fell 14 basis points to 6.15% in the week ended Sept. 13, data from the Mortgage Bankers Association showed Wednesday. The rate has fallen for seven consecutive weeks, the longest such period since 2018-2019.
The average contract interest rate for 15-year mortgages fell 29 basis points to 5.42 percent, also the lowest level in two years. Variable-rate mortgages fell to 5.66 percent.
Mortgage rates are tracking U.S. Treasury bonds, and the yield on the 10-year U.S. Treasury note is near its lowest since mid-2023, ahead of what the Fed expects to be a series of rate cuts. Central bankers are widely expected to begin easing monetary policy later Wednesday, but economists and investors are divided on how deep the cut will be.
Lower borrowing costs helped the group’s homeownership applications index rise 5.4% to a three-month high. The refinance index rose more than 24% to its highest level since April 2022.
The continued decline in mortgage rates could further boost confidence among developers, who rose in September for the first time in six months. Lower borrowing costs could also help attract more potential buyers and sellers back to the resale market, which is constrained by a limited number of homes for sale.
The MBA survey, conducted weekly since 1990, uses responses from mortgage lenders, commercial banks and savings banks. The data covers more than 75% of all residential mortgage applications in the United States.
– Vince Golle for Bloomberg
