US mortgage rates declined last week to an almost one-year low, sparking a surge in refinancing activity and encouraging prospective buyers to step off the sidelines.
The contract rate on a 30-year mortgage fell 15 basis points to 6.49% in the week ended Sept. 5, according to Mortgage Bankers Association data released Wednesday. Rates on 15-year mortgages and five-year adjustables dropped to their lowest levels in about a year.
That was enough to drive up the group’s measure of mortgage activity, which includes home purchases and refinancing, to a three-year high.
READ MORE: Buyers may flood market this fall. Here’s why
A sustained slide in financing costs would offer much-needed support for a beleaguered housing market. Residential construction has been a sore spot for the economy — subtracting from gross domestic product in four of the last five quarters.
Mortgage rates track moves in the Treasury market, and the yield on the 10-year note slid sharply in the past week, including after Friday’s weak jobs report for August. Investors are betting the Federal Reserve will respond to a sluggish labor market will begin a series of interest-rate cuts, starting next week.
MBA’s measure of home-purchase applications increased 6.6% to the highest level since the first week of July. The refinancing gauge advanced more than 12% to the strongest reading in nearly a year.
In addition to cheaper financing, there are signs home prices are cooling off. The latest data from S&P Cotality Case-Shiller showed a national price gauge rose 1.9% in June from a year earlier, the smallest advance since 2023.
READ MORE: Buyers gain hope on rates, sellers turn cautious
Potential homebuyers are finding a greater selection in the marketplace, with the inventory of existing properties at a five-year high. In the new-homes market, the number of completed homes for sale is the highest in 16 years.
The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.
