LOS ANGELES — Home loan borrowing costs eased again this week as the average rate on a 30-year mortgage declined to its lowest level since early April.
The rate fell to 6.87% from 6.95% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.67%.
This is the third straight weekly decline in the average rate, which has mostly hovered around 7% since April. Higher mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting homebuyers’ purchasing options.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also eased this week, lowering the average rate to 6.13% from 6.17% last week. A year ago, it averaged 6.03%, Freddie Mac said.
“Mortgage rates fell for the third straight week following signs of cooling inflation and market expectations of a future Fed rate cut,” said Sam Khater, Freddie Mac’s chief economist.
Home loan rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy and the moves in the 10-year Treasury yield, which lenders use as a guide to pricing home loans.
Yields have mostly eased recently following some economic data showing slower growth, which could help keep a lid on inflationary pressures and convince the Federal Reserve to begin lowering its main interest rate from its highest level in more than 20 years.
Federal Reserve officials said last week that inflation has fallen further toward their target level of 2% in recent months and signaled that they expect to cut their benchmark interest rate once this year. The central bank had previously projected as many as three cuts in 2024.
Until the Fed begins lowering its short-term rate, long-term mortgage rates are unlikely to ease significantly, economists say.
The average rate on a 30-year mortgage remains near a two-decade high, discouraging many would-be homebuyers. The elevated rates contributed to a lackluster spring homebuying season. Sales of previously occupied U.S. homes fell in March and April as home shoppers contended with rising borrowing costs and prices.
In recent weeks, long-term US mortgage rates have been on a downward trend, reaching their lowest point since early April. This decrease in rates has come as a welcome relief for potential homebuyers and homeowners looking to refinance their existing mortgages.
According to the latest data from Freddie Mac, the average rate on a 30-year fixed-rate mortgage dropped to 3.04% for the week ending June 24th. This marks a significant decrease from the previous week’s average of 3.13% and is the lowest rate seen since early April. Similarly, the average rate on a 15-year fixed-rate mortgage also fell to 2.38%, down from 2.44% the week before.
There are several factors contributing to the decline in mortgage rates. One key factor is the overall economic uncertainty stemming from the ongoing COVID-19 pandemic. As the economy continues to recover from the effects of the pandemic, investors are turning to safer assets like US Treasury bonds, which has led to lower yields and subsequently lower mortgage rates.
Additionally, the Federal Reserve’s commitment to keeping interest rates near zero for the foreseeable future has also played a role in driving down mortgage rates. The Fed’s efforts to stimulate economic growth and support the housing market have helped to create a favorable environment for borrowers.
For potential homebuyers, these low mortgage rates present a unique opportunity to lock in a historically low rate and save on interest over the life of their loan. Lower rates can also make homeownership more affordable for those looking to purchase a new home or refinance their existing mortgage.
However, it’s important to keep in mind that mortgage rates can fluctuate and are influenced by a variety of factors, including economic indicators, inflation rates, and geopolitical events. As such, it’s always a good idea to consult with a financial advisor or mortgage lender to determine the best course of action based on individual financial goals and circumstances.
Overall, the current decrease in long-term US mortgage rates is good news for borrowers and signals a positive outlook for the housing market. Whether you’re in the market for a new home or considering refinancing your existing mortgage, now may be a great time to take advantage of these historically low rates.
