The average rate on a 30-year mortgage in the U.S. fell for the second consecutive week, offering some respite to potential homebuyers grappling with soaring prices and a limited housing supply. According to Freddie Mac, the average 30-year rate dropped to 7.02% from 7.09% the previous week, although it was higher than the 6.39% rate recorded a year ago.
This decline comes after a series of five consecutive weekly increases that had driven rates to their highest level since November 30. Higher mortgage rates can significantly increase monthly costs for borrowers, constraining their purchasing power.
Freddie Mac's chief economist, Sam Khater, noted that while the rate decrease was modest, it could offer some flexibility in the budgets of potential homebuyers. Additionally, the average rate on 15-year fixed-rate mortgages, often favored by homeowners refinancing their loans, also decreased to 6.28% from 6.38% last week, compared to 5.75% a year ago.
Mortgage rates are influenced by various factors, including the bond market's response to the Federal Reserve's interest rate policy and fluctuations in the 10-year Treasury yield, which serves as a benchmark for home loan pricing. Treasury yields have been on a downward trend since Federal Reserve Chair Jerome Powell indicated that the central bank is more inclined to reduce its main interest rate rather than raise it.
Despite this, the Fed has emphasized that it will not consider interest rate cuts until it is confident that inflation is slowing down towards its 2% target. Consequently, economists believe that mortgage rates are unlikely to see significant declines in the near future.
After reaching a 23-year high of 7.79% in October, the average 30-year mortgage rate remained below 7% this year until last month when it started to climb. The sudden increase in rates last month posed challenges for potential homebuyers during the peak home sales season, which typically spans from March to June.
In March, sales of existing homes in the U.S. declined as buyers faced elevated mortgage rates and escalating prices, further complicating the already competitive housing market.
