Introduction to Mortgage Rates
The average rate on a 30-year U.S. mortgage edged lower this week, returning to its lowest level in about a year. The average long-term mortgage rate slipped to 6.3% from 6.34% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.32%.
By ALEX VEIGA, AP Business Writer
Current Mortgage Rates
The average rate on a 30-year U.S. mortgage has stayed above 6% since September 2022, the year mortgage rates began climbing from historic lows. The housing market has been in a slump ever since. The modest drop brings the average rate back to where it was two weeks ago, after a string of declines brought down home loan borrowing costs to their lowest level since early October 2024.
Factors Influencing Mortgage Rates
Mortgage rates are influenced by several factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations for the economy and inflation. They generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans. The 10-year yield was at 4.13% at midday Thursday, up from around 4.09% the same time last week. The yield has been trending higher since it slid to around 4.02% on Sept. 11.
Impact of Federal Reserve Decisions
In late July, mortgage rates started declining in the lead-up to the Federal Reserve’s widely anticipated decision last month to cut its main interest rate for the first time in a year amid growing concern over the U.S. job market. However, Fed Chair Jerome Powell has since signaled a cautious approach to future interest rate cuts. That’s in sharp contrast with other members of the Fed’s rate-setting committee, particularly those who were appointed by President Donald Trump, who are pushing for faster cuts.
Housing Market Trends
Sales of previously occupied U.S. homes sank last year to their lowest level in nearly 30 years. So far this year, sales are running below where they were at this time in 2024. Still, the recent decline in mortgage rates could set the stage for a modest lift in sales in coming weeks, going by recent data on contract signings. The National Association of Realtors’ seasonally adjusted index of pending U.S. home sales rose 4% in August from the previous month and 3.8% from the same month last year.
Mortgage Applications and Refinancing
Mortgage applications, which include loans to buy a home or refinance an existing mortgage, fell 4.7% last week from a week earlier, according to the Mortgage Bankers Association. But applications for mortgage refinance loans made up 53.3% of all applications. More prospective homebuyers are also applying for an adjustable-rate mortgage. Such loans, which typically offer lower initial interest rates than traditional 30-year, fixed-rate mortgages, accounted for 9.5% of all mortgage applications last week.
Conclusion
The average long-term US mortgage rate easing to 6.3% is a significant development in the housing market. As the rate returns to its lowest level in about a year, it may set the stage for a modest lift in sales in coming weeks. However, economists generally forecast the average rate on a 30-year mortgage to remain near the mid-6% range this year. With many homeowners refinancing their existing loans to take advantage of lower rates, the housing market may see some improvement in the near future.
FAQs
- What is the current average rate on a 30-year U.S. mortgage?
The current average rate on a 30-year U.S. mortgage is 6.3%. - How has the housing market been performing?
The housing market has been in a slump since September 2022, with sales of previously occupied U.S. homes sinking to their lowest level in nearly 30 years last year. - What factors influence mortgage rates?
Mortgage rates are influenced by several factors, including the Federal Reserve’s interest rate policy decisions and bond market investors’ expectations for the economy and inflation. - Will mortgage rates continue to decline?
Economists generally forecast the average rate on a 30-year mortgage to remain near the mid-6% range this year, but it’s difficult to predict with certainty. - What is the impact of the Federal Reserve’s decisions on mortgage rates?
The Federal Reserve’s decisions on interest rates can have a significant impact on mortgage rates, with cuts in the main interest rate potentially leading to lower mortgage rates.
