US Mortgage Rates Decline for Third Consecutive Week: What It Means
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Good news for potential homebuyers! The average rate on a 30-year U.S. mortgage has decreased for the third consecutive week, offering a bit of relief in a market still grappling with high borrowing costs. According to Freddie Mac, the average long-term rate fell to 6.81% from 6.84% last week. This time last year, the rate averaged 6.87%.
The 15-year fixed-rate mortgage, a popular choice for homeowners looking to refinance, also saw a decrease, dropping to 5.96% from 5.97% the previous week. A year ago, this rate stood at 6.13%.
What's Driving the Mortgage Rate Decline?
Mortgage rates are influenced by a complex interplay of factors, including the Federal Reserve's interest rate policies and bond market investors' expectations regarding the economy and inflation. A key indicator is the 10-year Treasury yield, which lenders use to help determine home loan pricing. On Wednesday, the 10-year Treasury yield was at 4.35%, down from 4.58% just a few weeks prior.
Recent Trends and Market Impact
While the 30-year mortgage rate has remained relatively close to its year-to-date high of just above 7% (reached in mid-January), it briefly dipped to a low of 6.62% in early April. This recent decline brings the average rate back to mid-May levels, mirroring a recent decrease in bond yields.
Elevated mortgage rates significantly impact affordability, adding hundreds of dollars to monthly payments and reducing buyers' purchasing power. This has contributed to a slowdown in the U.S. housing market since 2022, when rates began their ascent from pandemic-era lows. The sales of previously occupied U.S. homes experienced a substantial drop last year.
This continued easing of mortgage rates offers a glimmer of hope for prospective buyers navigating a challenging housing market. Whether this trend will continue remains to be seen, as various economic factors will continue to play a role.