Average US Rate on a 30-year Mortgage Falls to 6.89%, Third Straight Weekly Decline

Mortgage Rates Ease for Third Week in a Row

The average rate on a 30-year mortgage in the U.S. has eased for the third week in a row, providing a small reprieve for prospective home shoppers entering the market before the busy spring homebuying season begins. According to Freddie Mac, the average rate fell to 6.89% from 6.95% last week. A year ago, it averaged 6.64%.

Borrowing Costs on 15-year Fixed-Rate Mortgages Also Retreat

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners seeking to refinance their home loan to a lower rate, also retreated this week. The average rate fell to 6.05% from 6.12% last week. A year ago, it averaged 5.9%, Freddie Mac said.

Mortgage Rates Influenced by Bond Market and Federal Reserve Policy

Mortgage rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy decisions. The average rate on a 30-year mortgage briefly fell to a 2-year low just above 6% last September, but has been mostly rising since then, echoing a sharp rise in the 10-year Treasury yield, which lenders use as a guide for pricing home loans.

10-year Treasury Yield Reaches 4.43% in Midday Trading

The yield, which was at 3.62% in mid-September, reached 4.79% three weeks ago amid fears inflation may remain stubbornly higher than the Fed’s 2% target. A solid U.S. economy and worries about tariffs and other policies potentially coming from President Donald Trump have also helped push bond yields higher. The 10-year Treasury yield was at 4.43% in midday trading Thursday.

Elevated Mortgage Rates Discourage Home Shoppers

Elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers, prolonging a national home sales slump that began in 2022. While sales of previously occupied U.S. homes rose in December for the third month in a row, 2024 was the worst year for home sales in nearly 30 years, worse than 2023, which had been the worst in decades.

New Data on Pending Home Sales Points to Further Declines

New data on pending home sales points to potentially further declines in coming months. The National Association of Realtor’s pending home sales index fell 5.5% in December from the previous month, ending a four-month streak of increases. A lag of a month or two usually exists between when a contract is signed and when the home sale is finalized, which makes pending home sales a bellwether for future completed home sales.

Economists Forecast Mortgage Rates to Remain Above 6%

For those hoping that mortgage rates will retreat significantly, economists say that’s unlikely. Forecasts mostly call for the average rate on a 30-year mortgage to remain above 6% this year, with some economists including an upper range as high as 6.8%. The Federal Reserve left its benchmark interest rate unchanged last week after cutting it three times in a row to close 2024, a sign of a more cautious approach as the Fed seeks to gauge where inflation is headed and what policies the Trump administration will pursue.

Conclusion

The average rate on a 30-year mortgage has fallen for the third week in a row, providing a small reprieve for prospective home shoppers. However, economists forecast mortgage rates to remain above 6% this year, which may continue to discourage home shoppers and prolong the national home sales slump.

FAQs

* What is the current average rate on a 30-year mortgage?
+ The current average rate on a 30-year mortgage is 6.89%.
* What is the current average rate on a 15-year fixed-rate mortgage?
+ The current average rate on a 15-year fixed-rate mortgage is 6.05%.
* Why are mortgage rates influenced by the bond market and Federal Reserve policy?
+ Mortgage rates are influenced by the bond market and Federal Reserve policy because the 10-year Treasury yield is used as a guide for pricing home loans.
* What is the forecast for mortgage rates this year?
+ Economists forecast the average rate on a 30-year mortgage to remain above 6% this year, with some economists including an upper range as high as 6.8%.