US 30-year mortgage rate falls to lowest since April 2023 by Reuters

(Reuters) – The interest rate on the most popular U.S. home loan fell to a 16-month low after Federal Reserve Chairman Jerome Powell signaled the central bank was ready to cut borrowing costs next month to to prevent further weakening of the labor market.

The average contract rate on a 30-year fixed-rate mortgage fell 6 basis points in the week ended Aug. 23 to 6.44 percent, the Mortgage Bankers Association said Wednesday. This was the lowest since April 2023.

The drop in mortgage rates, down 38 basis points in four weeks, kept refinancing applications high as homeowners who bought when rates were even higher moved to lock in lower monthly payments. The average 30-year MBA rate reached 7.9% last October.

Mortgage applications and purchase inquiries rose by just 0.5% and 1% respectively, as potential homebuyers resist a further drop in rates.

Interest rate futures reflect bets that the Fed will cut short-term rates by a full percentage point by the end of this year.

Rising borrowing costs and a limited number of new and existing homes being offered for sale have made home ownership increasingly unaffordable for many. Democratic presidential candidate Kamala Harris and her Republican rival Donald Trump have made housing affordability an integral part of their pitch to voters in November’s presidential election, both promising to lower costs for Americans in different ways.