A stock market sell-off sent investors rushing to the relative safety of the bond market Monday morning, causing yields to fall and mortgage rates to rise.
The average rate on the popular 30-year fixed mortgage fell to 5.99% on Monday, according to Mortgage News Daily, matching its lowest levels since 2022. This time last year, the rate was 6.89%.
The decline in yields is due to a combination of factors, including new uncertainties over tariffs, a slowdown in inflation and economic weakness revealed Friday by a lackluster gross domestic product report.
While rates briefly dipped into the 5% range for a few hours in January, they rebounded the same day. That’s unlikely this time around, according to Matthew Graham, director of operations at Mortgage News Daily.
“This visit to the top 5 looks more sustainable on paper,” Graham said. “As long as the bond market as a whole doesn’t experience a major sell-off, mortgage rates have a better chance of remaining closer to current levels than last time. And if the bond market as a whole improves further (i.e. 10-year yields fall below 4.0%), mortgage rates will likely see additional gains.”
The drop in rates will likely prompt more refinancing, which has increased in recent weeks. Requests to refinance a home loan are about 130% higher than a year ago, according to the Mortgage Bankers Association.
The drop in rates is a positive sign as we approach the very important spring real estate market. Buyers entering the market today will have greater purchasing power than last spring.
For example, a buyer putting 20% down on a median-priced home, or about $400,000 according to the National Association of Realtors, would receive a monthly payment of $1,916 for principal and interest. A year ago, this payment would have been $2,105, a difference of $189.
Although the difference in the monthly payment may seem small, more borrowers would generally qualify for a loan at today’s lower rates. Realtors Chief Economist Lawrence Yun noted in his January pending home sales report that “with mortgage rates near 6 percent, an additional 5.5 million households that didn’t qualify for a mortgage a year ago could benefit from today’s lower rates.” »
He said, however, that most newly qualified households don’t act immediately, “but based on past experience, about 10 percent could enter the market, which could add about 550,000 new homebuyers this year compared to last year.”
So far, mortgage applications for home purchases have not seen a major reaction to the rate cut. These requests were only 8% higher year-over-year as of mid-February.
Correction: This story has been updated to correct that Monday’s 30-year fixed mortgage rates were their lowest level since 2022. A previous version misstated the milestone.