Mortgage rates fall again, but home sales still lag

Mortgage rates declined again this week, sparking a subtle boost in demand for purchase and refinance applications. 

Still, many buyers continue to hold off on making a move while waiting for steeper cuts, as fresh data shows existing home sales eased in August from the month before.

Freddie Mac's latest Primary Mortgage Market Survey, released Thursday, showed that the average rate on the benchmark 30-year fixed mortgage dropped to 6.09%, down from the 6.20% reading of the past two weeks. The average rate on a 30-year loan was 7.19% a year ago.

The latest drop in rates comes after the Federal Reserve cut the federal funds rate by 50 basis points, but the mortgage rate declines were due to market expectations of future cuts.

"Mortgage rates continued declining towards the six percent mark, reviving purchase and refinance demand for many consumers," said Sam Khater, Freddie Mac’s chief economist. 

"While mortgage rates do not directly follow moves by the Federal Reserve, this first cut in over four years will have an impact on the housing market," Khater continued. "Declining mortgage rates over the last several weeks indicate this cut was mostly baked in, but we expect rates to fall further, sparking more housing activity."

Many would-be buyers and sellers are holding out to see if rates fall further. Currently, about 80% of mortgage holders have a rate below 5%, according to a Zillow survey.

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The average rate on the 15-year fixed mortgage declined to 5.15% from 5.27% last week. One year ago, the rate on the 15-year fixed note averaged 6.54%.