The housing market is showing signs of life as mortgage rates continue their descent towards 6%. This follows the Federal Reserve’s recent decision to cut interest rates by 0.5%, a move that has spurred increased demand for both refinancing and home purchases.
According to Freddie Mac’s Primary Market Mortgage Survey, the average rate for a 30-year fixed mortgage fell to 6.09% on Thursday, down from 6.2% a week ago and a significant drop from 7.19% a year earlier. The rate for a 15-year fixed mortgage also declined, settling at 5.15% compared to 5.27% a week prior and 6.54% a year ago.
Freddie Mac’s chief economist, Sam Khater, stated that the falling mortgage rates are reviving purchase and refinance demand for many consumers. He explained that while mortgage rates don’t directly track the Federal Reserve’s actions, this first rate cut in over four years will have a noticeable impact on the housing market. The recent decline in rates indicates that the market had already anticipated the cut, and Khater anticipates further rate reductions, which will likely stimulate more housing activity.
The effects of these lower mortgage rates are also being felt in the stock market. Exchange-traded funds (ETFs) that invest primarily in mortgage-backed securities (MBS) or mortgage-related assets, which are directly influenced by changes in interest rates, are experiencing gains. IShares Mortgage Real Estate ETF REM rose by 0.82%, VanEck Mortgage REIT Income ETF MORT increased by 0.74%, and IShares MBS ETF MBB ticked up by 0.06%. Notably, IShares Mortgage Real Estate ETF holds a significant 15.2% of the REIT, Annaly Capital Management, Inc. NLY, while VanEck Mortgage REIT Income ETF holds 11.1%.
The falling mortgage rates have brought some much-needed relief to the housing market, offering a potential boost to both buyers and those looking to refinance their existing mortgages. As rates continue to fall, the housing market is likely to see further activity and increased demand.
