Mortgage rates fell this week for the first time since late August, easing some pressure on potential buyers facing higher borrowing costs on home loans.
The benchmark 30-year fixed-rate mortgage fell to 7.32% from 7.40% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the average rate was 6.19%.
Borrowing costs on 15-year fixed-rate mortgages, often sought by borrowers refinancing a home loan, also fell this week. This average rate fell to 6.68% compared to 6.71% last week. A year ago it was 5.44%.
Home loan rates are influenced by, among other factors, inflation, Federal Reserve policy and bond market investors’ expectations about the economy. They typically follow the path of the 10-year Treasury yield, which lenders use as a guide in pricing home loans.
Mortgage rates have risen since late February, when the war between the United States and Iran began, pushing up the price of oil and leading to higher inflation. The rise in rates also reflects increased volatility in the bond market, which has pushed up yields on U.S. Treasury bonds.
The yield on the 10-year Treasury has declined broadly in recent weeks after hitting its highest level since 2002. That has helped the average rate on a 30-year mortgage hold steady after hitting 7.4%, its highest level in nearly three years.
The yield was at 5% at midday on the bond market Thursday. It jumped to over 5.30% earlier this month and remains well above its pre-war level of 3.97% with Iran.
U.S. home sales remain stalled this year largely because of rising mortgage rates, which can add hundreds of dollars a month to costs for borrowers, limiting buyers’ purchasing power and prompting many to postpone buying a home.
In late February, the average rate for a 30-year mortgage briefly dropped to 5.98%, its lowest level dating back to late 2022. The rise in rates since then has added about $355 to the monthly cost for a borrower financing a $400,000 home loan, based on the latest average rate.
Depending on a borrower’s income, credit and other factors, they may qualify for a 30-year mortgage rate that is lower or higher than the current average.
The U.S. housing market has been in recession since 2022, when mortgage rates began to climb from pandemic-era lows. Sales of previously occupied U.S. homes remained essentially flat last year, stuck at their lowest level in 30 years.
In its latest forecast, mortgage buyer Fannie Mae expects the rate on a 30-year mortgage to average 7.4% in the final quarter of this year and 7.5% on average in 2027.
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