Mortgage rates drop below 7% amid projected economic slowdown

Rates retreated as incoming data indicates slower economic growth

Mortgage rates drop below 7% amid projected economic slowdown

Freddie Mac's latest report shows a slight drop in the 30-year fixed-rate mortgage (FRM) to 6.99%, down from last week's 7.03%.

The agency’s Primary Mortgage Market Survey (PMMS) showed a modest retreat for mortgage rates, attributed to recent data indicating slower economic growth.

“Mortgage rates retreated this week given incoming data showing slower growth,” Sam Khater, chief economist for Freddie Mac, said in the survey report. “Rates are just shy of 7%, and we expect them to modestly decline over the remainder of 2024. If a potential buyer is looking to buy a home this year, waiting for lower rates may result in small savings, but shopping around for the best rate remains tremendously beneficial.”

In comparison to a year ago, the current 30-year FRM rate of 6.99% is up from 6.71%. Similarly, the 15-year fixed-rate mortgage averaged 6.29% this week, down slightly from 6.36% last week but higher than the 6.07% average a year ago.

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Holden Lewis, a home and mortgage expert at NerdWallet, commented on the slight decrease in mortgage rates.

"Mortgage rates dropped this week on news that the manufacturing sector is slowing a little bit. The change was small, though, because markets are waiting for next week's Fed meeting, in which the Federal Reserve will issue its quarterly economic projections."

Mortgage applications also reflected the slowdown. The Mortgage Bankers Association (MBA) reported a 5.2% decrease in its Market Composite Index for the week ending May 31, which measures mortgage loan application volume. Adjusted for the Memorial Day holiday, the seasonally adjusted volume saw a 5.2% decline, while the unadjusted index fell 16% from the previous week.

MBA chief economist Mike Fratantoni noted, “After adjusting for the Memorial Day holiday, both purchase and refinance application volumes were down, with purchase activity specifically 13% below last year’s level.

“Government purchase volume was down less, helped by growth in VA applications. The market is relying on first-time homebuyer demand, and many first-time buyers do use government lending programs.”

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