The average 30-year U.S. mortgage rate ended a three-week streak of gains, reflecting a decline in long-term U.S. Treasury yields.
The average long-term mortgage rate fell to 6.23% from 6.26% last week, mortgage buyer Freddie Mac said Wednesday. A year ago, the rate averaged 6.81%.
As recently as four weeks ago, the average rate was at 6.17%, the lowest level in more than a year.
Borrowing costs for 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell this week. The average rate was 5.51%, down from 5.54% last week. It was 6.10% a year ago, Freddie Mac said.
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Mortgage rates are affected by several factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations about the economy and inflation. They generally track the trajectory of the 10-year Treasury yield, which lenders use as a guide for pricing home loans.
The 10-year yield was at 4.01% midday Wednesday. That’s down from about 4.13% a week ago.
When mortgage rates fall, the purchasing power of home buyers increases.
The easing of mortgage rates this fall helped U.S. pre-occupied home sales increase on an annualized basis for a fourth straight month in October.
Still, affordability remains a challenge for many first-time homeowners even after years of skyrocketing prices. Uncertainty about the economy and job market is also keeping many potential buyers on the sidelines.
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This helped maintain sales of the formerly occupied US. Houses left in 2023 around 4 million per year. Historically, sales have typically been around 5.2 million per year.
Mortgage rates began to fall this summer ahead of the Federal Reserve’s decision in September to cut its key interest rate for the first time in a year amid signs that the labor market was slowing. The Fed cut its key interest rate again last month, although Fed Chairman Jerome Powell warned that further rate cuts were not guaranteed.
The Fed officials’ comments nevertheless fueled speculation that the central bank will cut interest rates again at its December meeting. Wall Street traders are betting on a nearly 83% chance the Fed will cut next month, according to CME Group data.
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“It is increasingly likely that the Fed will cut interest rates at its Dec. 10 meeting,” said Lisa Sturtevant, chief economist at Bright MLS. “But we shouldn’t expect this to translate into a big drop in mortgage rates.”
The central bank does not set mortgage interest rates, and even if it lowers its short-term rates, it does not necessarily mean that home loan rates will necessarily fall.
Last fall, after the Fed cut its rate for the first time in more than four years, mortgage rates moved higher, finally reaching just above 7% this January. At the time, the yield on 10-year government bonds was climbing to 5%.
Recent forecasts from economists at the National Association of Realtors and First American call for the average 30-year mortgage rate to drop to around 6% next year.
