Mortgage rate drops historically since 2008

Mortgage rate declined for a second consecutive week on Friday, marking the biggest drop since December 2008.

According to Freddie Mac, for nearly 3 decades the fixed-rate mortgage averaged 5.30% in the week ending July 7, down from 5.70% the previous week. When compared to the same period a year ago, when it was 2.9%, it is still much higher.

At the beginning of the year, rates spiked rapidly, reaching a peak of 5.81% in mid-June. However, since then, economic worries have caused them to decline. Some of the big rate hikes in May and June were partially offset by the 40 basis point decline.

The 10-year Treasury yield has been volatile recently, dropping below 2.8% in the first week of July after spending most of June around 3%, which is why mortgage rates are declining this week, according to CNN Business.

Although the Federal Reserve does not directly control mortgage interest rates, its activities have an impact on them. Mortgage rates often follow the 10-year US Treasury bond market. Investors frequently sell government bonds when they see or expect rate increases, which drives up yields and, consequently, mortgage rates.

The increase in mid-June was brought on by an unanticipatedly poor news on inflation; according to the Consumer Price Index, the rate was 8.6 percent in May, the highest in forty years. Just before the Federal Reserve announced that it will increase its benchmark short-term rate by 75 basis points to combat inflation, this caused mortgage rates to increase by 55 points.

According to Joel Berner, senior economic research analyst for Realtor.com, listing prices have increased by over 8.5% year-over-year for 24 straight months and mortgage rates have hit all-time highs since the late 2000s.

The fact that additional houses are coming on the market, he said, is the only bright spot for prospective homebuyers. The greatest annual gain in active listings was recorded in June according to statistics from Realtor.com.

According to Sam Khater, chief economist at Freddie Mac, "over the last two weeks, the 30-year fixed-rate mortgage" fell by half a percent as worries about a possible recession keep increasing.

Additionally, higher rates are reducing demand among potential buyers. The Mortgage Bankers Association reports that the number of mortgage applications fell by 5.4% from the previous week to the week ending July 1.

Applications for home mortgages and refinances are still low because rates are still much higher than they were a year ago, according to Joel Kan, MBA's associate vice president of economic and industry forecasts. He added that continued affordability issues and low inventory restrain purchase activity, and homeowners continue to face decreased motivations to submit refinancing applications.