During what is usually a less competitive period of the year for the housing market, the average rate on a 30-year mortgage in the United States decreased for the third consecutive week, which is a positive trend for potential homeowners.
According to Freddie Mac, a mortgage buyer, the rate decreased from 6.69% to 6.6% last week on Thursday. The rate averaged 6.95% a year ago.
This week also saw a decrease in the cost of borrowing for 15-year fixed-rate mortgages, which are common among homeowners looking to refinance their home loan to a lower rate. Last week, the average rate dropped from 5.96% to 5.84%. According to Freddie Mac, it averaged 6.38% a year ago.
The 30-year mortgage average rate is currently at its lowest point since it was 6.54% on October 24.
“Homebuyer demand has increased in recent weeks due to a combination of declining mortgage rates, firm consumer income growth, and a bullish stock market,” said Sam Khater, chief economist at Freddie Mac. Although the housing market’s prognosis is better, the gain is modest since purchasers still face significant affordability obstacles.
Many prospective homeowners have been unable to afford homeownership due to high mortgage rates and growing housing prices. Home sales in the United States are expected to have their worst year since 1995.
Changes in the yield on U.S. 10-year Treasury notes, which lenders use as a benchmark when pricing house loans, are one of the many variables that affect mortgage rates.
As recently as September, the yield was below 3.7%; this month, it has primarily remained at 4.2%. At noon on Thursday, it was 4.3%.
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The recent decline in rates follows a mostly upward climb since the average rate on a 30-year mortgage slid to a two-year low of 6.08% in late September afterthe Federal Reserve cut its main interest ratefrom a two-decade high. Although the central bank does not determine mortgage rates, changes in the 10-year Treasury yield are influenced by its operations as well as the direction of inflation.
At its policy meeting next week, a large number of Wall Street traders and analysts anticipate that the Fed will lower its main interest rate once more.
Home shoppers and homeowners seeking to refinance their existing mortgage to a lower rate are taking advantage of the recent pullback in home-loan borrowing costs. Mortgage applications rose 5.4% last week from a week earlier, the fifth straight increase, according to the Mortgage Bankers Association. Applications for refinance loans increased by 27%.
Purchase applications have increased on an annual basis every week except for one over the past three months, a positive sign for the mortgage market to close out this year, said MBA CEO Bob Broeksmit.
With home prices near all-time highs and still rising nationally, albeit more slowly, many prospective homebuyers are likely holding out for mortgage rates to ease further in coming months.
But there may not be much relief, given that many housing economists predict the average rate on a 30-year mortgage will remain above 6% next year.
— The Associated Press’s Alex Veiga
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