The average interest rate for a 30-year mortgage in the United States has decreased for the third consecutive week, bringing some relief to potential homebuyers during a period that usually sees reduced competition in the housing market.
According to data from Freddie Mac, the current rate has fallen to 6.6%, down from last week’s 6.69%. In comparison, the rate was significantly higher at 6.95% just a year ago.
Similarly, the borrowing costs for 15-year fixed-rate mortgages, which are often favored by those looking to refinance, have also seen a decrease. This week, the average rate for these loans dropped to 5.84%, down from 5.96% the previous week, and down from 6.38% a year ago.
The present average for a 30-year mortgage marks the lowest level since October 24, when it registered at 6.54%. Sam Khater, the chief economist at Freddie Mac, noted that the combination of declining mortgage rates, robust consumer income growth, and a thriving stock market has led to increased demand among homebuyers in recent weeks. He cautioned, however, that the positive trend is somewhat constrained due to ongoing affordability challenges that many buyers face.
High mortgage rates combined with rising home prices have made homeownership unattainable for numerous potential buyers, with U.S. home sales projected to face their weakest performance since 1995.
The fluctuations in mortgage rates are governed by a variety of factors, including the yield on U.S. 10-year Treasury bonds, which serve as a benchmark for lenders pricing home loans. Recently, this yield has shifted from below 3.7% in September to approximately 4.2% this month, reaching around 4.3% as of midday Thursday.
The recent drop in interest rates follows a period of increase after the 30-year mortgage rate fell to a two-year low of 6.08% in late September, influenced by the Federal Reserve’s action to cut its main interest rate from a peak not seen in two decades. While the Fed does not directly control mortgage rates, its policies and the broader inflation trends can impact the behavior of the 10-year Treasury yield.
Many analysts and market traders anticipate that the Fed may again lower its main interest rate at its upcoming policy meeting next week.
In light of the recent decrease in borrowing costs, both homebuyers and those looking to refinance are seizing the opportunity. According to the Mortgage Bankers Association, mortgage applications increased by 5.4% last week compared to the week before, marking five consecutive weeks of growth. Applications for refinancing rose by an impressive 27%.
Bob Broeksmit, CEO of the Mortgage Bankers Association, highlighted that purchase applications have seen consistent growth on a weekly basis over the past three months—except for one instance—indicating a positive outlook for the mortgage market as the year draws to a close.
While home prices remain close to record highs and continue to rise, albeit at a slower pace, many prospective buyers may be waiting for further reductions in mortgage rates in the months to come. However, experts warn that significant relief may not be forthcoming, as many housing economists predict that the average 30-year mortgage rate will stay above 6% in the coming year.
