Mortgage rates have seen a significant decline recently, providing potential homebuyers with a chance for more affordable borrowing. The average interest rate for a 30-year fixed mortgage fell to 6.35% this week, down from 6.5% the previous week. This marks the largest weekly drop in mortgage rates this year, according to data from Freddie Mac. Just earlier this year, rates exceeded 7%.

The decrease in mortgage rates is partly attributed to recent government data indicating a notable slowdown in hiring. This has led to increased expectations that the Federal Reserve may lower interest rates, which could further reduce borrowing costs. Analysts suggest that each percentage point drop in mortgage rates can save homebuyers thousands of dollars annually, depending on the home's price.

Ken Johnson, a real estate economist at the University of Mississippi, remarked, "This is a significant drop." However, the current trend presents a dilemma for buyers: should they act quickly to secure a favorable mortgage rate, or wait to see if rates will fall even further?

Mortgage rates typically follow the yield on 10-year Treasury bonds, which are influenced by expectations regarding the Federal Reserve's benchmark interest rate. The federal funds rate currently ranges from 4.25% to 4.5%, a level maintained since the Fed's last adjustment nine months ago. Fed Chair Jerome Powell has hinted at the possibility of an interest rate cut, indicating a greater concern for slowing employment growth than for rising prices.

Market sentiment suggests a 76% chance of three quarter-point rate cuts by the end of the year. However, experts caution that the anticipated decline in interest rates is already reflected in current mortgage rates. Lu Liu, a professor at the Wharton School, noted, "Expectations of lower near-term rates are being priced in, so current mortgage rates look a bit more attractive."

Julia Fonseca, a professor at the Gies College of Business, advised homebuyers against trying to predict future mortgage rates. "Trying to time the market or predict future rate movements is notoriously hard to do," she said.

In addition to falling mortgage rates, the median sales price of homes in the U.S. has also decreased. The median price was $410,800 for the three months ending in June, down from $423,100 in the previous three-month period. Fonseca explained, "Prices have cooled, inventory is up, time on the market is up. All of this suggests it's a more favorable market for buyers relative to recent years."

Homebuyers who purchase now but later find that rates have dropped further can consider refinancing their mortgages. Fonseca recommended avoiding mortgage contracts with pre-payment penalties, as these could increase the cost of refinancing. "I would be guided by your needs and your personal financial situation, rather than try to make predictions about future prices and future interest rates," she added.