The average interest rate for a 30-year mortgage in the United States has decreased for the second consecutive week, although it remains just shy of the 7% mark, providing little solace for potential homebuyers as the spring purchasing season approaches.

As reported by mortgage buyer Freddie Mac, the rate fell from 6.96% to 6.95% this week. A year prior, the average stood at 6.63%.

Similarly, the borrowing costs associated with 15-year fixed-rate mortgages, often sought by homeowners looking to refinance for a more favorable rate, also saw a dip this week. The average rate decreased from 6.16% to 6.12%, compared to an average of 5.94% one year ago, Freddie Mac indicated.

Numerous factors affect mortgage rates, including the bond market’s reaction to decisions made by the Federal Reserve regarding interest rates. Last September, the average rate on a 30-year mortgage briefly slipped to a two-year low of just above 6%, but has largely been on the rise since, coinciding with a notable increase in the yield of the 10-year Treasury, which lenders utilize as a benchmark for setting home loan prices.

In mid-September, the yield was at 3.62%, but it surged to 4.79% two weeks ago, fueled by concerns that inflation might persist above the Fed’s target of 2%. Additionally, a robust U.S. economy and apprehensions about potential tariffs and policies from the Trump administration have contributed to rising bond yields.

On Thursday, during midday trading, the 10-year Treasury yield stood at 4.53%.

High mortgage rates can impose significant additional costs on borrowers, which has deterred many home shoppers and perpetuated a decline in home sales nationwide that began in 2022. Despite a rise in sales of previously occupied homes in December, marking the third consecutive month of increases, 2024 is shaping up to be the worst year for home sales in almost three decades, even surpassing the low of 2023.

Economist Sam Khater from Freddie Mac noted, “Due to these elevated rates and an ongoing supply shortage, many homebuyers are still facing challenges with affordability and a considerable number have opted to stay on the sidelines.”

New figures concerning pending home sales suggest that declines may continue in the upcoming months. The pending home sales index from the National Association of Realtors dropped by 5.5% in December compared to the previous month, terminating a four-month trend of increases. When evaluated year-over-year, pending transactions decreased by 5% from December 2023.

Given that there is generally a one- to two-month delay between a contract signing and the finalization of the home sale, pending home sales can serve as a useful indicator of future completed sales.

Meanwhile, as home sales have decelerated, the inventory of homes available on the market has been on the rise. Although the current inventory is still low compared to historical standards, the number of homes for sale nationally has increased nearly 25% from a year ago, according to Realtor.com. This situation is beneficial for homebuyers who can manage the existing mortgage rates or opt for cash purchases.

On the other hand, for those anticipating a significant decrease in mortgage rates, economists suggest that such an expectation is unlikely to be fulfilled. Many economic forecasts indicate that the average rate for a 30-year mortgage will stay above 6% this year, with projections suggesting a possible upper limit around 6.8%.

The Federal Reserve decided to maintain its benchmark interest rate on Wednesday after three consecutive cuts last year, indicating a more cautious stance as it assesses inflation trends and the direction of the Trump administration’s policies. Although the Federal Reserve does not directly set mortgage rates, the decision to keep the main interest rate steady is likely to lead to limited movement in mortgage rates in the near future.

Mike Fratantoni, the chief economist at the Mortgage Bankers Association, predicted, “With the Fed maintaining its current stance, we expect that long-term rates, including those for mortgages, will largely remain within a restricted range in the foreseeable future.”