For the third consecutive week, the average rate on a 30-year mortgage in the United States decreased, which is somewhat of a comfort for those looking to buy a home before the hectic spring homebuying season begins.
Mortgage buyer Freddie Mac reported on Thursday that the average rate dropped from 6.95% to 6.89% from the previous week. It averaged 6.64% a year ago.
This week also saw a decline in borrowing prices 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 was 6.12%; this week, it dropped to 6.05%. According to Freddie Mac, it averaged 5.9% a year ago.
The bond market’s response to the Federal Reserve’s interest rate policy decisions is one of the many variables that affect mortgage rates. Echoing a steep increase in the 10-year Treasury yield, which lenders use as a benchmark for pricing house loans, the average rate on a 30-year mortgage has been rising since last September, when it briefly dropped to a 2-year low just above 6%.
Three weeks ago, the yield, which was at 3.62% in mid-September, rose to 4.79% due to concerns that inflation might continue to rise above the Fed’s 2% objective. Bond yields have also risen as a result of the strong U.S. economy and concerns about possible tariffs and other policies from President Donald Trump.
At midday Thursday, the yield on the 10-year Treasury was 4.43%.
A nationwide decline in home sales that started in 2022 has been prolonged by high mortgage rates, which can increase borrowers’ monthly expenses by hundreds of dollars.
The worst year for home sales in over 30 years was 2024, which was worse than 2023, which had been the worst in decades, even though sales of previously inhabited U.S. homes increased in December for the third consecutive month.
There may be more drops in the months ahead, according to new data on pending house sales. After rising for four months, the National Association of Realtors’ pending home sales index dropped 5.5% in December compared to the previous month.
Pending house sales serve as a predictor of future completed home sales because there is typically a one to two month lag between the signing of a contract and the completion of the home sale.
Economists say it is improbable for anyone hoping for a major decline in mortgage rates.
The average 30-year mortgage rate is expected to stay above 6% this year, according to most forecasts; some economists even put the highest range at 6.8%.
After lowering its benchmark interest rate three times in a row to end 2024, the Fed left it unchanged last week, indicating a more cautious stance as it looks to predict the direction of inflation and the policies the Trump administration would implement.
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— The Associated Press’s Matt Ott
