The average rate for a 30-year mortgage in the U.S. has hit its lowest point in four months, bringing good news to potential homebuyers who have faced challenges due to high borrowing costs. According to Freddie Mac, the long-term mortgage rate dropped to 6.63%, down from 6.72% last week. Just a year ago, the rate averaged 6.47%.
Rates for 15-year fixed-rate mortgages, often favored by homeowners looking to refinance, also saw a decline. This rate fell to 5.75% from 5.85% last week, compared to 5.63% a year earlier.
High mortgage rates have kept the housing market sluggish since early 2022, when rates began to rise from the historic lows during the pandemic. Last year, home sales plummeted to their lowest in nearly three decades.
This marks the third consecutive week of declining rates. The current average for a 30-year mortgage sits just above 6.62%, which is close to the year’s low set back in April.
However, mortgage rates remain near their peak this year of 7.04%, recorded in mid-January. This situation continues to impact home sales, making them slow as we move further into the year.
Mortgage rates are affected by various factors, including the Federal Reserve’s policy decisions and investors’ views on the economy and inflation. A key indicator is the 10-year Treasury yield, which is used by lenders to determine mortgage pricing. The yield was at 4.23% midday Thursday, slightly rising from 4.22% late the previous day.
Despite being lower than last week’s figures, the yield is a concern given recent economic reports indicating weakness in the job market. Last week, the Federal Reserve’s committee decided to keep interest rates stable, with Chair Jerome Powell stating that inflation continues to exceed their 2% target, and the job market is balanced.
Market analysts are now speculating that based on the latest jobs report, the Fed might need to cut interest rates soon. Some see this as beneficial for the economy, while others warn it could lead to rising inflation, particularly in light of ongoing tariff impacts.
“Both buyers and sellers appreciate lower mortgage rates, but there’s uncertainty about whether rates will keep falling,” said Lisa Sturtevant, chief economist at Bright MLS. She noted that a weaker economy could lower rates, but inflation risks could keep them high.
For those able to buy now, more homes are available, and sellers in areas like Miami, Chicago, and Los Angeles have been lowering prices compared to last year.
Lower mortgage rates typically encourage more potential buyers to enter the market, which could push home prices higher. Economists generally expect that the average rate for a 30-year mortgage will stay above 6% this year, with predictions from Realtor.com and Fannie Mae suggesting it may ease to around 6.4% by year’s end.
