The average long-term US mortgage rate fell for the third straight week, offering some relief to prospective home buyers facing higher home prices.
The average 30-year fixed-rate mortgage in the US declined to 7.18 per cent from 7.24 per cent last week, mortgage buyer Freddie Mac said on Thursday. One year ago, the average rate was 6.22 per cent.
Borrowing costs on 15-year fixed-rate mortgages, often sought by borrowers refinancing a home loan, also fell again this week. That average rate dipped to 6.57 per cent from 6.60 per cent last week. A year ago, it was at 5.50 per cent.
Lower mortgage rates relieve some of the pressure on prospective home buyers facing higher borrowing costs on home loans.
Rates on home loans are influenced by inflation, Federal Reserve policy and bond market investors’ expectations for the economy, among other factors. They generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.
Until the past few weeks, mortgage rates had been on the rise since late February, when the US war with Iran began, pushing up the price of oil and driving inflation higher. The run-up in rates also reflected heightened bond market volatility, which led to rising yields on US Treasuries.
However, the 10-year Treasury yield has been mostly easing for the past month after climbing to its highest level since 2002. That’s caused the average rate on a 30-year mortgage to come back down after reaching 7.4 per cent early last month, its highest level in nearly three years.
The yield was at 4.84 per cent at midday on the bond market on Thursday, its lowest level since early September. It had surged to more than 5.30 per cent in early October and remains well above its 3.97 per cent level from before the war with Iran.
US home sales remain stalled this year mostly due to elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, limiting home buyers’ purchasing power and prompting many to put off buying a home.
In late February, the average rate on a 30-year mortgage briefly dipped to 5.98 per cent, its lowest level going back to late 2022. The rise in rates since then has added roughly US$300 to US$350 to the monthly cost for a borrower financing a US$400,000 home loan.
Depending on a borrower’s income, credit and other factors, they may qualify for a rate on a 30-year mortgage that is below or above the current average.
The US housing market has been in a slump since 2022, when mortgage rates began to climb from pandemic-era lows. Sales of previously occupied US homes were essentially flat last year, stuck at a 30-year low.
AP
