Mortgage rates in the US fell for the first time in eight weeks, per Bloomberg.

This week saw a slight drop in the average rate for the benchmark 30-year mortgage, ending a seven-week trend of increases. This provides some modest relief to potential homebuyers who are facing a housing market that's becoming increasingly unaffordable.

The average rate for a 30-year mortgage decreased from 7.79% last week to 7.76%, according to Freddie Mac, the mortgage buyer. One year ago, the rate averaged 6.95%.

As mortgage rates continue to climb, they impose additional costs of hundreds of dollars each month on borrowers, limiting their purchasing power in an already challenging housing market. Furthermore, these rising rates discourage homeowners who locked in much lower rates about two years ago, when rates were around 3%, from selling their homes.

The combination of increasing mortgage rates and escalating home prices has had a dampening effect on the sales of previously owned U.S. homes. Home sales have declined for four consecutive months, reaching their slowest pace in over a decade in September.

The average rate for a 30-year home loan surpassed 6% in September 2022 and has remained above this threshold since then. These rates have been closely correlated with the 10-year Treasury yield, which serves as a reference for loan pricing by lenders. Various factors influence home loan rates, including expectations of future inflation, global demand for U.S. Treasuries, and the Federal Reserve's decisions regarding interest rates.

The yield on the 10-year Treasury recently experienced an increase, surpassing 5% last week, marking its highest level since 2007. This was in response to signals from the Federal Reserve, indicating the possibility of keeping the key short-term rate higher for an extended period to combat inflation.

In its most recent policy meeting, the Federal Reserve decided not to raise its primary interest rate for the second consecutive time. This led to lower bond yields, with the 10-year Treasury yield settling at 4.63% late Wednesday, slightly higher at 4.69% in Thursday's afternoon trading. In May, this yield was at approximately 3.50%, and it was merely 0.50% during the early stages of the pandemic.