Mortgage Rates Reach Their Lowest in Two Years

For the better part of the last three years, interest rates have continued to rise, leaving many would-be homeowners relegated to the sidelines of the market. Not only do these higher interest rates make it harder for people to qualify for mortgages, but those who can qualify often find themselves hesitant when it comes to committing to a long-term mortgage.

This drop in mortgage rates has been a welcome reprieve for those who haven’t been sure as to how they should proceed in the market.

Today, find out more about what this drop in interest rates means and how it can help you if you’re interested in buying a home, or if you’ve been considering refinancing the house you live in.

What Happened to Interest Rates?

On Thursday, September 19, 2024, financial analysts around the nation rejoiced as they reported that we were seeing lower mortgage rates than we had seen in two years. This cut came with the news that the Federal Reserve planned to further slash interest rates by September 25.

Some insiders believe that interest rates are going to drop by as much as half a percentage point by the end of September 2024, though that remains to be seen.

The good news, for now, is that rates are finally starting to return to some level of normalcy, this coming after it was reported near the beginning of the year that the Federal Reserve was not expected to address interest rates until 2025.

For the week that ended on September 13, the contract rates for an average 30-year mortgage dropped to 6.15%. According to the Mortgage Bankers of America (MBA), this represented a 14-point decrease. Not only is that 14-point drop a significant one, it follows a 14-point drop the previous week, and puts interest rates at their lowest point since September 2022.

The good news didn’t stop on September 13. On September 19, interest rates experienced a more moderate decline when they dropped again to 6.09%. That marked yet another decline according to Freddie Mac.

At this point in 2023, mortgage rates were hovering around 7.19% as the real estate market struggled to find its footing following the long-term effects of the COVID-19 pandemic.

The decline in interest rates on 30-year mortgages is only part of the good news that potential homebuyers have received this week. Rates on 15-year mortgages also dropped, and currently stand at 5.15%, a figure that’s down .12% from the week before.

This has not only made things easier for people wanting to buy homes but is a welcomed source of relief for people who have been waiting to refinance their homes.

According to the MBA, applications for refinancing made up more than 50% of mortgage applications in September, which is not only the highest that number has reached in well over a year but is also up historically from the median average of 48%.

This uptick in refinancing signals a change in consumer behaviors, which is one of the most important aspects of an economic shift. Refinancing allows homeowners to essentially reboot their mortgages, lowering their monthly payments in exchange for starting the process over.

This process allows homeowners to have more money, which they can potentially use as disposable income, in their budgets every month. This shift comes before an official change in policy from the Fed, though one is expected to come sooner than later.

Why Are Interest Rates Dropping?

On the surface, it looks like not much has changed in the American economy, leaving many wondering what has sparked this sudden decline in interest rates.

Uncertainty about the global economy has certainly played into the decline, as have some policy changes by central banks on the global level. With the assumption that more changes are coming domestically, interest rates dropping is the natural result.

Surprisingly, the ongoing economic uncertainty that we’ve experienced in the United States has also finally started to produce some good results.

Because of the shaky economic ground that we’ve been on since shortly after the pandemic unofficially ended, big-time investors have been investing in government bonds at a higher clip. This influx of investment money allows policymakers to lower interest rates, in what amounts to a large-scale example of cause and effect.

What Should You Do?

Regardless of where you stand in the current housing market, you can put these lower interest rates for you. It’s no secret that millions of people have been waiting for a decline in rates to begin the buying process.

Many of those buyers have been looking at homes online, and may have even checked out a couple of potential properties in person. However, they’re largely starting from the beginning.

This is great news for you if you’re in a similar position, but you’ll need to act quickly. With a drop in interest rates, more and more buyers are going to be active in the market, resulting in bidding wars breaking out for properties.

Start by getting prequalified for a mortgage so you understand just how much home you can afford and start looking. The sooner that you can get an offer in, the better your chances of buying the home you love.

If you already own a home, this is a great chance to refinance, which is a welcomed reprieve for those who have been pinching pennies over the last couple of years. Even if you don’t plan on living in your home for the next three decades, refinancing your mortgage is a powerful tool that involves leveraging some debt to improve your finances in the short-term.

Interest rates are low and getting lower, and that’s a great thing for the economy as a whole.