The average rate on a 30-year fixed mortgage plunged by a notable amount on Friday, falling 16 basis points to 6.29%. This drop represents a large reversal from May, when rates had reached a high of 7.08%. Today’s decline is the biggest single-day drop since August 2024. This is a welcomed change bringing much-needed relief for would-be homebuyers squeezed between high interest rates and limited housing options.
According to Matt Graham, Chief Operating Officer of Mortgage News Daily, the decline in mortgage rates was a direct response to a highly anticipated jobs report. For instance, lenders were recently quoting rates that were 0.25% better than where we started in October. Graham noted, “This was a pretty straightforward reaction to a hotly anticipated jobs report.”
Hale, chief economist at Realtor.com, pointed out how critical this rate decrease is for homebuyers who are actively searching and able to make a purchase right now. That lower rate would reduce your monthly payment to $2,226 on a $450,000 home. For reference, the old 7% rate would have equated to a $2,395 monthly payment. That’s a difference of $169 in monthly payments—not an insignificant sum that can stretch affordability for many would-be buyers.
Hale stated, “Homebuyers grapple with a lack of affordability, sellers contend with more competition, and builders deal with lower buyer demand.” She added that today’s low rates provide some relief. Analysts say it’ll only start to make a tangible difference to buyers’ purchasing power if rates fall into the 5% territory.
Despite the recent dip in mortgage rates, home purchase applications were still down 6.6% from four weeks ago. This report was released by the Mortgage Bankers Association. This deterioration indicates a large pool of would-be buyers are still hesitant, despite lower rates starting to appear.
The Homebuilding ETF, for example, has had incredible bullish momentum over the last month as mortgage rates slowly started coming down. This time, rates are really breaking out of the high 6% range that we’ve been stuck in for months. Once this shift happens, homebuilders will begin to fully realize the benefits of greater buyer demand.