US Mortgage Rates Expected To Drop Further, Reaching Six-Month Low

What’s going on here?

The recent market upheaval suggests US mortgage rates are set to decline further, hitting a six-month low of around 6.70% for a 30-year fixed-rate mortgage.

What does this mean?

With mortgage rates expected to drop, there has been a surge in internet searches for refinancing. Google Trends reported that searches for refinancing options on Monday were the highest in at least 90 days, and United Wholesale Mortgage confirmed a considerable increase in refinance inquiries. However, Guild Mortgage observes that while interest is up, the rates aren’t yet low enough for most borrowers to act. A Boston College Law School professor notes that refinancing makes sense when rates drop two percentage points below the current mortgage rate. The Federal Reserve is expected to start cutting interest rates soon, potentially aiding the housing market.

Why should I care?

For markets: Navigating the waters of uncertainty.

Mortgage application volumes have dipped sharply since early 2022 due to Federal Reserve interest rate hikes in response to inflation. However, with rates currently over a full percentage point below their peak from late 2022, refinancing applications have climbed to a two-year high, now comprising nearly 40% of overall applications, according to the Mortgage Bankers Association.

The bigger picture: Global economic shifts on the horizon.

Existing home sales have declined for four consecutive months, but economists anticipate a modest rebound later this year as the Fed’s rate cuts take effect. Isaac Boltansky from BTIG predicts a new market equilibrium that benefits both buyers and sellers, though he cautions that rates likely won’t revert to the lows experienced during the COVID crisis.