The average rate on a 30-year mortgage in the U.S. has decreased for the third consecutive week, offering a positive development for potential homebuyers, especially during a traditionally slower period in the housing market. According to Freddie Mac, the rate has dropped to 6.6% from 6.69% last week, marking a decline from the 6.95% average rate recorded a year ago.
Similarly, borrowing costs for 15-year fixed-rate mortgages, favored by homeowners looking to refinance at lower rates, have also seen a reduction this week. The average rate fell to 5.84% from 5.96% last week, compared to 6.38% a year ago.
These recent rate adjustments have brought the 30-year mortgage rate to its lowest level since October 24, when it stood at 6.54%. Freddie Mac's chief economist, Sam Khater, noted that the combination of declining mortgage rates, steady consumer income growth, and a strong stock market has stimulated homebuyer demand in recent weeks.
However, despite these positive trends, challenges persist in the housing market due to elevated mortgage rates and increasing home prices, making homeownership unattainable for many prospective buyers. U.S. home sales are projected to reach their lowest levels since 1995.
Mortgage rates are influenced by various factors, including fluctuations in the yield on U.S. 10-year Treasury bonds, which serve as a benchmark for lenders in pricing home loans. The yield, which has been hovering around 4.2% this month, was at 4.3% on Thursday.
The recent decline in rates follows a period of mostly upward movement since late September when the 30-year mortgage rate hit a two-year low of 6.08% after a Federal Reserve interest rate cut. While the Fed's actions do not directly determine mortgage rates, they impact the trajectory of inflation, influencing the 10-year Treasury yield.
Anticipation is high for another Fed interest rate cut at the upcoming policy meeting, as indicated by many economists and traders. Homebuyers and refinancers are capitalizing on the recent dip in borrowing costs, with mortgage applications rising by 5.4% last week, marking the fifth consecutive increase. Refinance loan applications surged by 27%.
Despite the positive momentum in the mortgage market, with purchase applications showing consistent growth over the past three months, housing economists predict that the average 30-year mortgage rate will likely remain above 6% next year. As home prices continue to rise, potential buyers are closely monitoring mortgage rate trends for possible future relief.
