Mortgage rates in the US have dropped for a third consecutive week, falling to 6.87%, the lowest level since early April.
Home loan borrowing costs eased again this week, with the average rate on a 30-year mortgage dropping to its lowest level since early April.
The rate decreased to 6.87% from 6.95% last week, mortgage buyer Freddie Mac reported Thursday. A year ago, the rate averaged 6.67%.
This marks the third consecutive weekly decline in the average rate, which has mostly hovered around 7% since April. Higher mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting homebuyers’ purchasing options.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell this week, lowering the average rate to 6.13% from 6.17% last week. A year ago, it averaged 6.03%, according to Freddie Mac.
“Mortgage rates fell for the third straight week following signs of cooling inflation and market expectations of a future Fed rate cut,” said Sam Khater, Freddie Mac’s chief economist.
Home loan rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy and the movements in the 10-year Treasury yield, which lenders use as a guide for pricing home loans.
Yields have mostly eased recently following economic data indicating slower growth, which could help keep a lid on inflationary pressures and convince the Federal Reserve to begin lowering its main interest rate from its highest level in over 20 years.
Federal Reserve officials said last week that inflation has fallen further toward their target level of 2% in recent months and signaled that they expect to cut their benchmark interest rate once this year. The central bank had previously projected as many as three cuts in 2024.
Until the Fed begins lowering its short-term rate, long-term mortgage rates are unlikely to ease significantly, economists say.
Even then, mortgage rates “are likely to remain well above the 3.5% to 5% range that prevailed in the decade before the pandemic,” said Jiayi Xu, an economist with Realtor.com.
