Paulina Cachero
Bloomberg News (TNS)
Mortgage interest rates in the US continued their downward trend and fell to a new annual low.
The average interest rate for a 30-year fixed-term loan was 6.46 percent, compared to 6.49 percent the previous week, Freddie Mac said in a statement on Thursday.
Borrowing costs have fallen sharply from over 7% earlier this year, giving home seekers more purchasing power and making some potential buyers hesitant. Sales of used U.S. homes rose in July for the first time in five months, the National Association of Realtors reported Thursday.
But despite the 1.3 percent month-over-month increase, the pace of sales was the slowest for a July since 2010, showing that high prices and a lack of affordable options are still making bargains hard for many Americans. Buyers and sellers may also wait to make decisions until financing costs continue to fall.
“Interest rates plummeted earlier this month and are now just below 6.5 percent, which is not enough to motivate prospective homebuyers,” Freddie Mac chief economist Sam Khater said in the statement. “We expect rates will likely need to fall another percentage point to spur buyer demand.”
Many real estate experts are hoping that the US Federal Reserve will cut interest rates to stimulate the sluggish market. Although falling inflation suggests that the first rate cut will take place next month, the timing and extent of future measures will also depend on the state of the labor market, says economist Jiayi Xu of Realtor.com.
“Politicians are trying to choose the timing of the cuts carefully,” she said, “without triggering a sharp rise in unemployment.”
The recent drop in mortgage rates has brought down housing costs somewhat. The average monthly rate was $2,587 in the four weeks ended Aug. 18, down 0.1% from a year earlier, Redfin Corp. reported. While that’s only a small drop, it marks the first annual decline since 2020, the brokerage said.
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