The average rate on a 30-year mortgage in the United States has seen a slight decrease this week, dropping to 6.89% from 6.95% the previous week, according to mortgage buyer Freddie Mac. This dip comes as a modest relief for home shoppers who are currently facing record-high home prices in the market. A year ago, the average rate stood at 6.96%.
Throughout this year, the average mortgage rate has largely remained around 7%, which is more than double the rate from just three years ago. These elevated mortgage rates have added significant costs for borrowers, deterring many potential homebuyers and contributing to the nation's housing slump, now in its third year.
Additionally, borrowing costs for 15-year fixed-rate mortgages, popular among homeowners refinancing their loans, also saw a decrease this week, with the average rate falling to 6.17% from 6.25% the previous week. A year ago, this rate averaged 6.30%.
Mortgage rates are influenced by various factors, including the bond market's response to the Federal Reserve's interest-rate policy and movements in the 10-year Treasury yield, which serves as a benchmark for pricing home loans.
Following a recent decline in the 10-year Treasury yield, mortgage rates have followed suit. The yield, which had reached over 4.7% in late April, has been on a downward trend, prompting expectations of a potential rate cut by the Federal Reserve.
While Fed officials have indicated a desire to see more data supporting a trend of inflation nearing the target level of 2%, most economists anticipate the first rate cut to occur in September, with the possibility of another cut by year's end.
Despite forecasts suggesting a gradual easing of mortgage rates in the coming months, experts predict that the average rate on a 30-year home loan will likely remain above 6% for the year. This may not be sufficient to entice hesitant homebuyers or motivate homeowners with low existing rates to sell their properties.
Record-high home prices and a limited supply of homes on the market have contributed to a slowdown in home sales, with May marking the third consecutive month of decline. The housing market, traditionally busiest in the spring, has seen a decrease in activity, with June showing signs of a similar trend.
While there is optimism for a gradual decline in mortgage rates in the future, the overall outlook suggests that rates are expected to remain relatively stable for the time being, pending further developments in the bond market and Federal Reserve policy.
