W
ill mortgage rates continue to decline? Some potential home buyers are holding out hope for even lower rates before making a move. Despite rates being significantly lower than they were a year ago (when they were above 7%), they have remained in the mid-6% range in recent weeks, according to Freddie Mac. The 30-year fixed-rate loan was at a 6.46% average this week.

    Freddie Mac's chief economist, Sam Khater, predicts that rates will gently slope downward through the end of the year due to softer incoming economic data. Earlier this month, rates plummeted and are now lingering just under 6.5%. However, this has not been enough to motivate potential home buyers, and rates likely need to decline another percentage point to generate buyer demand.

    Mortgage applications for home purchases have fallen 5% this week and are 8% lower than a year ago, according to the Mortgage Bankers Association. Despite lower mortgage rates, potential buyers may be more selective now that there are more options available.

    The National Association of REALTORS® reported a 20% increase in existing homes' For Sale inventory compared to a year ago, giving buyers more choices and increasing seller competition. However, rates are still not low for those borrowers out there with sub-5% rates, according to Joel Kan, an economist with the MBA. The majority of current mortgage holders have rates below 5%—many even below 3%—from when they purchased a home years earlier. This has made many homeowners reluctant to move.

    Freddie Mac reports the following national average with mortgage rates for the week ending Aug. 22:

     30-year fixed-rate mortgage: averaged 6.46%, down slightly from last week’s 6.49% average. A year ago, rates averaged 7.23%.

     15-year fixed-rate mortgage: averaged 5.62%, dropping from last week’s 5.66% average. A year earlier, rates averaged 6.55%.