The average long-term mortgage rate in the United States experienced a decline this week, reaching the lowest point in four weeks. This development provides some relief to potential homebuyers who have been struggling with a real estate market impacted by soaring prices and a scarcity of available properties.
According to Freddie Mac, the benchmark 30-year home loan rate dropped from 6.96% to 6.78% compared to the previous week. A year ago, the rate stood at 5.54%. Despite this decline, the current average rate remains just below the peak of 7.08% witnessed in early November. These high rates translate into increased costs for borrowers, limiting their purchasing power in an already unaffordable housing market for many Americans.
The reduction in mortgage rates comes in the wake of a slight easing in the 10-year Treasury yield, which had surpassed 4% a couple of weeks ago for the first time since early March. Currently, the yield hovers around 3.86% as of midday trading Thursday, showing fluctuations in response to mixed economic retail sales and labor market data throughout the week.
Wall Street anticipates that the Federal Reserve’s upcoming interest rate hike, expected next week, could potentially be the last in this cycle, as inflation has been on a downward trend since the previous summer.
Freddie Mac’s Chief Economist, Sam Khater, noted that the decrease in mortgage rates is a result of the slowing inflation.
While the Federal Reserve has been raising interest rates since early last year due to inflationary concerns, mortgage rates do not directly mirror these rate increases. Instead, they tend to follow the movement of the 10-year Treasury note’s yield. Factors such as investors’ expectations for future inflation, global demand for U.S. Treasurys, and the Federal Reserve’s actions with interest rates influence the rates on home loans.
It’s worth mentioning that the current average rate for a 30-year mortgage is still more than double what it was two years ago when ultra-low rates fueled a surge in home sales and refinancing. The current higher rates have deterred homeowners who locked in lower borrowing costs two years ago from selling their properties, contributing to the scarcity of available homes in the market and resulting in a 23% decline in home sales over the past six months.
In addition to the 30-year mortgage rates, the average rate on 15-year fixed-rate mortgages, commonly favored by those refinancing their homes, also experienced a decrease this week, falling from 6.30% to 6.06% compared to the previous week. A year ago, this rate averaged 4.75%.
Source: {Matzav.com}
