The average rate on a 30-year mortgage dropped again this week, extending a welcome trend for prospective buyer facing record-high home cost.
The rate dropped to 6.86% from 6.87% last week, mortgage buyer Freddie Mac stated Thursday. A year ago, the rate averaged 6.71%.
This is the fourth straight weekly fall in the mortgage, which has mostly hovered around 7% this year. Home sales have been dropping in recent months as the elevated rates, which can add hundreds of dollars a month in prices for borrowers, have put off many house shoppers.
Sales of last occupied U.S. homes dropped in May for the third month in a row. Sales of fresh built single-family homes dropped in April and May from a year earlier by 7.7% and 16.5%, respectively.
“The 30-year fixed-rate mortgage moves to trend down, hitting the smallest level in almost three months,” said Sam Khater, Freddie Mac’s chief economist. “By historical standards, the economy is in perfect shape, and we expect rates to resume to come down over the summer months, carrying additional homebuyers back into the demand.”
Mortgage rates are affected by many factors, including how the bond market respond to the Federal Reserve’s interest rate policy and the moves in the 10-year Treasury yield, which lenders utilize as a guide to pricing home loans.
The yield, which topped 4.7% in late April, has been mostly dropping recently following some economic information showing slower development, which could assist keep a lid on inflationary stresses and convince the Federal Reserve to start lowering its main interest rate from its highest level in more than 20 years.
Earlier this month, Fed officials stated that inflation has moved closer to its destination level of 2% in recent months and signaled that they expect to cut their characteristic interest rate once this year. The central bank had lastly projected as many as three cuts in 2024, which increased expectations in the housing market for mortgage rates to have eased further by now.
With only one rate cut thinked before the end of this year, “relief may come too small and too late for many first-time homebuyers,” said Jiayi Xu, an economist in a report.
Meanwhile, mortgage rates ticked up this week for 15-year fixed-rate loans, famous with home ownership refinancing their home loans. They standard 6.16% this week, up from 6.13% the week before. A year ago, it standard 6.06%, Freddie Mac expressed.