Mortgage rates are on their way down
Mortgage rates are easing again, largely due to a struggling labor market and expectations of further rate cuts to come.
Here’s a quick look behind the math on why mortgage rates are declining a bit: Mortgage rates usually track 10-year Treasury yields, which move with investor expectations about the Fed. But here’s the loop: when the Fed cuts (or signals cuts ahead), it’s trying to spur growth now — but investors read those moves as signs of a weaker economy later. They rush into Treasurys for safety, pushing bond prices up and yields down. Those lower yields then trickle into mortgage-backed securities, and lenders pass the savings on as lower mortgage rates.
That’s why you don’t see mortgage rates move in lock-step with rate cuts from the Fed. It’s a game of anticipation, and these recently lower rates had materialized prior to the most recent cut.
Most recently, the average 30-year fixed rate has slid to 6.3%, an 11-month low and down from roughly 6.8% just a few months ago. That looks like a minor adjustment on the surface, but the reality is that it’s boosted purchasing power by more than $20,000 since midsummer, trimming the typical monthly mortgage payment down to $2,604 — over $200 less than May’s peak, according to Redfin.
Still, buyers aren’t exactly rushing in. Pending home sales are up just 1% from a year ago, and Redfin’s demand index is slipping, down 10% over the past year. Prices are holding firm too; the median home sale price sits near $393,000, up 1.7% year-over-year — partly because new listings have slowed. Sellers are hesitant to put homes on the market if it means turning around and buying into today’s high costs.
All of this leaves the housing market in a strange limbo: mortgage rates are finally giving buyers some relief, but not enough to spark a flood of activity. As one Redfin agent put it, “There’s not a flood of buyers now that mortgage rates are coming down, but I am seeing a trickle as some house hunters do the math and realize rates have dropped enough to fit a monthly payment into their budget.”
