The average rate on a 30-year mortgage in the United States has decreased to 6.69%, reaching its lowest level since late October.
According to Freddie Mac, the rate dropped from 6.81% last week and is down from 7.03% a year ago.
Borrowing costs for 15-year fixed-rate mortgages, which are commonly favored by homeowners looking to refinance, also saw a decline. The average rate for these loans dropped to 5.96% from 6.1% last week, a notable decrease from 6.29% one year ago.
Mortgage rates are influenced by several factors, including the yield on US 10-year Treasury bonds, which lenders use as a benchmark for pricing home loans. While the Federal Reserve does not directly set mortgage rates, its actions on interest rates and inflation expectations significantly impact market movements.
The latest rate reduction follows a general rise in mortgage rates since September, when they fell to a two-year low of 6.08% after the Federal Reserve cut its key interest rate. Although mortgage rates have trended upward in recent weeks, many analysts predict that the Fed could reduce rates again during its upcoming meeting, which may further influence borrowing costs.
Despite the overall increase in mortgage rates since September, the number of mortgage applications has risen. According to the Mortgage Bankers Association (MBA), applications for home loans increased by 2.8% last week, with purchase applications reaching their highest level since January. The MBA attributes this growth to lower rates and higher inventory levels, providing buyers with more options compared to earlier in the year.
However, with home prices remaining near all-time highs and continuing to rise, many prospective homebuyers are likely waiting for rates to decrease further before making a purchase. Housing economists forecast that mortgage rates will stay in the 6% range through 2025, making homeownership challenging for many buyers due to the combination of high prices and borrowing costs.
Freddie Mac’s chief economist, Sam Khater, noted that the modest drop in rates has had a noticeable effect on purchase demand, highlighting the persistent affordability challenges for homebuyers. As many homeowners hold onto mortgages with rates below 5%, potential buyers may remain hesitant until they see further rate reductions.
While the outlook for 2025 suggests mortgage rates may stabilize around 6.5%, the ongoing affordability crisis in the housing market is expected to continue affecting homebuyers, limiting the number of those able to enter the market.
With input from the Associated Press and FOX Business.
