Just as the yearly spring homebuying season begins, the average rate on a 30-year mortgage in the United States decreased for the sixth consecutive week, giving homebuyers a much-needed boost in purchasing power.
Mortgage buyer Freddie Mac reported on Thursday that the average rate dropped 6.76% from 6.85% the previous week. It averaged 6.94% a year ago.
This week also saw a decrease in the cost of borrowing for 15-year fixed-rate mortgages, which are common among homeowners looking to refinance their home loan to a lower rate. Last week, the average rate was 6.04%; this week, it dropped to 5.94%. According to Freddie Mac, it averaged 6.26% a year ago.
For many potential homebuyers, particularly first-time buyers without equity from an existing house to contribute to the purchase of a new one, the steady drop in mortgage rates this year hasn’t been sufficient to alter the affordability equation.
Despite a greater number of properties on the market, rising mortgage rates and prices turned off many prospective homebuyers, causing a decline in January sales of previously occupied U.S. homes.
There may be further sales drops in the months ahead, according to new data on pending house sales, which are a predictor of future completed sales.In January, they fell to their lowest point ever.
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The 30-year mortgage average rate is currently at its lowest point since it was 6.72% on December 19. Despite briefly dropping to a two-year low in September of last year, it has largely remained in the 7% range this year. That is more than twice as high as the average rate was just over four years ago, when it touched a record low of 2.65%.
According to Sam Khater, chief economist at Freddie Mac, the decline in mortgage rates along with a somewhat improving inventory is a positive indication for buyers.
According to Redfin data, the number of available properties in the United States increased last month to its highest level since June 2020. However, for many prospective homeowners, the combination of mortgage rates and prices is still too expensive.
The bond market’s response to the Federal Reserve’s interest rate policy decisions is one of the many variables that affect mortgage rates.
The most recent rate fall is consistent with a drop in the 10-year Treasury yield, which serves as a benchmark for home loan pricing by lenders.
Since then, the yield, which was at 4.79% in mid-January, has largely decreased, showing bond investors’ concerns about the possible effects of tariffs and other Trump administration measures.
Thursday at lunchtime, the 10-year yield was 4.28%.
— The Associated Press’s Alex Veiga
