US mortgage rates saw their biggest drop since February, offering some relief to homeowners and potential buyers. According to new data from the Mortgage Bankers Association (MBA), the average rate on a 30-year fixed mortgage fell by 10 basis points to 6.67% in the week ending August 8.
A basis point equals one-hundredth of a percentage point, so this drop may seem small — but in the mortgage world, it is a significant shift. The 15-year fixed mortgage rate also moved lower, slipping under 6% for the first time in four months. This marks the lowest level for that loan type since last October.
Mortgage rates often follow changes in the US Treasury market. At the start of August, the yield on the 10-year Treasury note dropped sharply. This happened after weaker-than-expected employment data was released, showing slower job growth and downward revisions for previous months. These numbers increased speculation that the Federal Reserve could cut interest rates next month.
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Lower borrowing costs can mean smaller monthly payments for homeowners looking to refinance. For those buying a home, a reduced rate can make it easier to qualify for a mortgage. The latest drop is already having an impact, especially among homeowners looking to take advantage of better terms on their existing loans.
Refinancing Activity Surges
The fall in mortgage rates has led to a surge in refinancing. MBA’s index measuring applications to refinance jumped 23% from the previous week. This is the second-highest level since early October.
Refinancing means replacing an old mortgage with a new one, often to get a lower interest rate. Homeowners who refinance now could potentially save thousands over the life of their loan. The recent rate drop has prompted many to act quickly before conditions change.
While refinancing applications soared, home-purchase applications only rose modestly — up 1.4% from the prior week. This smaller increase reflects ongoing challenges in the housing market. Even with the recent rate relief, mortgage costs remain much higher than they were just a few years ago.
High borrowing costs, combined with rising home prices, have kept purchases near their lowest levels in 15 years. The National Association of Realtors affordability index — which measures whether a typical family earns enough to qualify for a mortgage — is near its lowest point since records began in 1986. This means many households still find it difficult to afford a home.
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Housing Market Shows Small Signs of Relief
Despite the challenges, there are early signs of easing pressure in the housing market. According to real estate brokerage data, the income required to buy a home has fallen in 11 of the 50 largest US metro areas compared to last year. This suggests that at least in some places, buying a home may be slightly more affordable than before.
Homebuilders are also playing a role in attracting buyers. With new-housing inventory at its highest level in several years, many builders are offering incentives. These can include help with closing costs, temporary rate buy-downs, or even upgrades at no extra charge. Such offers are aimed at making new homes more appealing in a competitive market.
The MBA’s weekly survey has been tracking mortgage activity since 1990. It gathers data from mortgage bankers, commercial banks, and thrifts, covering more than 75% of all retail residential applications in the country. This makes it one of the most reliable indicators of mortgage market trends in the United States.
For now, the significant drop in the 30-year mortgage rate has brought some much-needed movement in refinancing activity. While the purchase market remains subdued, any reduction in borrowing costs can provide a boost to those navigating today’s challenging housing conditions.