The rate dropped to 6.89% from 6.95% last week, mortgage buyer Freddie Mac said Thursday
The average rate on a 30-year mortgage dropped marginally this week, providing modest relief for US home shoppers facing record-high home prices.
The rate dropped to 6.89% from 6.95% last week, mortgage buyer Freddie Mac said Thursday. A year ago, it averaged 6.96%.
The average rate has mostly stayed near 7% this year — more than double what it was just three years ago. The higher mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have put off many home shoppers this year, extending the nation’s housing slump into its third year.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also dropped this week, pulling the average rate down to 6.17% from 6.25% last week. A year ago, it averaged 6.30%, Freddie Mac said.
Mortgage rates are influenced by several factors, including how the bond market reacts to the Fed’s interest-rate policy and the moves in the 10-year Treasury yield, which lenders use as a guide for pricing home loans.
The yield, which topped 4.7% in late April, has been generally dropping since then on hopes that inflation is slowing enough to get the Fed to reduce its main interest rate from the highest level in over two decades.
Following June’s jobs report, which showed a cooling labour market, the 10-year Treasury yield declined this week and mortgage rates followed suit, according to Sam Khater, Freddie Mac’s chief economist.
On Thursday, the yield was down to 4.18% in midday trading in the bond market after a new update on inflation raised expectations that the central bank will soon begin reducing its benchmark rate.
Fed officials have said that while inflation has moved closer to the central bank’s target of 2% in recent months, they want to see more data supporting that trend before moving to reduce rates.
Most economists expect the Federal Reserve’s first rate cut to come in September, with potentially another cut by year’s end.
