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Home»Personal Finance»Mortgage Rates Drop, Easing Affordability
Personal Finance

Mortgage Rates Drop, Easing Affordability

August 29, 2024No Comments2 Mins Read
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Following the impactful words of Federal Reserve Chair Jerome Powell, mortgage rates saw a decline this week. Powell’s statement on Aug. 23 hinted at an impending adjustment in policy, which translates to an upcoming cut in interest rates.

Investors had already been anticipating a reduction in the federal funds rate at the Federal Reserve’s next meeting in September. Powell’s confirmation of this expectation led to a significant drop of 11 basis points in the average rate for the 30-year fixed-rate mortgage, now resting at 6.27% as of the week ending Aug. 29.

Powell attributed the need for rate cuts to the slowing job growth and increased unemployment rate, a consequence of the high interest rates set by the Fed. He emphasized the importance of preventing further cooling in labor market conditions, signaling the necessity for interest rate reductions.

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A Decline in Rates

Orphe Divounguy, senior economist at Zillow Home Loans, expressed optimism following Powell’s announcement. Mortgage rates have dropped over a percentage point since May, providing a more favorable environment for investors and potential homebuyers.

From an average of 7.32% in early May, the 30-year mortgage rate has steadily decreased, remaining below 6.5% for the past four weeks. This downward trend in rates has enhanced the affordability of homes compared to just a few months ago.

Lisa Sturtevant, chief economist at Bright MLS, highlighted that lower rates also facilitate existing homeowners in selling their properties. The current rate gap between existing mortgages and prevailing rates is narrowing, removing a barrier for potential sellers.

Sturtevant emphasized that many homeowners who purchased homes when rates were higher could significantly reduce their monthly payments by refinancing at the current lower rates. Waiting for further rate drops might result in missed opportunities for savings.

Affordability Drop Easing Mortgage Rates
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