By AP Business Writer Alex Veiga
(AP) MCLEAN, VA This week, the average 30-year U.S. mortgage rate dropped to its lowest point in over a decade, providing much-needed purchasing power to potential homebuyers and potentially reviving the moribund housing market.
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According to Freddie Mac, a mortgage buyer, the long-term rate dropped from 6.63% to 6.58% on Thursday. The average rate was 6.49% a year ago.
15-year fixed-rate mortgages, which are common among homeowners refinancing their house loans, also saw a decrease in borrowing costs. Last week, the average rate was 5.75%; this week, it was 5.71%. According to Freddie Mac, it was 5.66% a year ago.
Since early 2022, when mortgage rates began to rise from the pandemic’s lowest points, high rates have contributed to the U.S. home market’s sales downturn.Last year, home sales fell to their lowest point in almost three decades.
Rates have decreased for the fourth consecutive week. The 30-year mortgage rate is currently at its lowest point since it averaged 6.54% on October 24.
The Federal Reserve’s interest rate policy decisions, bond market investors’ forecasts for the economy, and inflation all have an impact on mortgage rates.
Lenders use the 10-year Treasury yield as the primary barometer for determining how much to charge for home loans. The yield increased little from 4.24% late Wednesday to 4.29% at noon on Thursday.
The yield has decreased in recent weeks following a lower-than-expectedThe Fed is expected to lower its key short-term interest rate next month, according to statistics from the July U.S. employment market.
Just as President Trump’s tariff policies run the risk of driving up costs for American consumers, a Fed rate decrease could benefit the job market and the economy as a whole, but it could also drive inflation.
Even if the Fed lowers its benchmark rate, increased inflation may cause bond yields to rise, which would raise mortgage rates.
The average 30-year mortgage rate is predicted by economists to stay above 6% this year. By the end of this year, the average rate is expected to drop to about 6.4%, according to recent predictions from Realtor.com and Fannie Mae.
The previous two weeks have seen some encouragement for homebuyers who have been forced to stay out of the market due to high financing prices, but it is unclear if this will be sufficient to attract more of them back into the market, according to Joel Berner, senior economist at Realtor.com.
According to the Mortgage Bankers Association, mortgage applications increased 10.9% last week compared to the week before as interest rates decreased.
However, homeowners requesting for loans to refinance their mortgages were largely responsible for the increase. These loan applications accounted for almost 47% of all applications, and the week saw the highest number of refinance applications since April, with a 23% increase in total applications.
In the meantime, MBA reported that applications for adjustable-rate mortgages, or ARMs, increased by 25% to reach their highest level since 2022.
