The average rate on a 30-year U.S. mortgage fell to its lowest level since early May, an encouraging trend for prospective homebuyers at a time when the U.S. housing market remains largely held back by elevated borrowing costs and rising prices.
The long-term rate fell to 6.77% from 6.81% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.86%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell. The average rate dropped to 5.89% from 5.96% last week. A year ago, it was 6.16%, Freddie Mac said.
High mortgage rates can add hundreds of dollars a month in costs for borrowers and reduce their purchasing power. That’s helped keep the U.S. housing market in a sales slump that dates back to 2022, when mortgage rates began to climb from the rock-bottom lows they reached during the pandemic.
Last year, sales of previously occupied U.S. homes sank to their lowest level in nearly 30 years. They’ve remained sluggish so far this year, as many prospective homebuyers have been discouraged by elevated mortgage rates and home prices that have kept climbing, albeit at a slower pace.
Mortgage rates are influenced by several factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations for the economy and inflation.
The key barometer is the 10-year Treasury yield, which lenders use as a guide to pricing home loans. The yield was at 4.28% in midday trading Thursday, down from 4.58% just a few weeks ago.
The average rate on a 30-year mortgage has remained relatively close to its high so far this year of just above 7%, set in mid-January. The 30-year rate’s low point this year was in early April when it briefly dipped to 6.62%.
The average rate has fallen four weeks in a row, reflecting the recent pullback in bond yields. With the latest decline, the average rate is now at its lowest level since May 8, when it was 6.76%.
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