The average long-term US mortgage rate falls from a 7-month high to 6.71% this week
THE ANGELS – The average long-term U.S. mortgage rate fell back from a seven-month high this week, a welcome change for homebuyers navigating high borrowing costs and increased competition for relatively few homes for sale.
Mortgage buyer Freddie Mac said Thursday that the average rate on its benchmark 30-year mortgage fell to 6.71% from 6.79% last week. A year ago, the rate averaged 5.23%.
The pullback follows three straight weekly gains, which pushed the average rate up to its highest level since early November, when it climbed to 7.08%.
The average rate on 15-year fixed-rate mortgages, popular with those refinancing their homes, also fell this week, falling to 6.07% from 6.1[ads1]8% last week. A year ago, it averaged 4.38%, Freddie Mac said.
High prices can add hundreds of dollars a month in costs for homebuyers, limiting how much they can afford in a market that remains out of reach for many Americans after years of high home prices. They also discourage homeowners who bought their home or refinanced in recent years when rates on a 30-year mortgage were around 3% from selling now that rates have roughly doubled. That is one of the reasons why the number of homes on the market is still close to historic lows.
“While high prices and other affordability challenges remain, inventory continues to be the biggest obstacle for potential homebuyers,” said Sam Khater, Freddie Mac’s chief economist.
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The U.S. housing market has been slow to regain its footing this year, constrained by high mortgage rates and the thin inventory of available homes.
Sales of previously occupied U.S. homes fell 23.2% in the 12 months ended in April, marking nine straight months of annual sales declines of 20% or more, according to the National Association of Realtors.
The lack of housing on the market has contributed to increasing prices. The national median home price fell to $388,800 in April – down just 1.7% from a year earlier.
Homebuyers who can afford to bypass the higher costs of borrowing on mortgages are increasingly doing so. About 33.4% of US homes purchased in April were paid for in cash, according to data from real estate firm Redfin. This is up from 30.7% a year earlier, and represents the largest proportion of cash purchases in nine years.
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Mortgage rates ticked higher in recent weeks along with the 10-year Treasury yield, which lenders use as a guide to pricing loans. The yield hit 3.81% two weeks ago, the highest point since early March. It was at 3.74% at midday trading on Thursday. Investors’ expectations of future inflation, global demand for US government bonds and what the Fed does with interest rates affect mortgage interest rates.
Uncertainty about what the Fed will do at its rate meeting next week and beyond could keep the bond market on edge, driving more volatility in mortgage rates.
The Fed has raised its benchmark interest rate 10 times in 14 months in an effort to lower stubbornly high inflation. Fed Chairman Jerome Powell and other central bank officials have recently signaled that the Fed may forego another rate hike at this month’s meeting with policymakers. Such a move would give the Fed time to evaluate the economic impact of its previous rate hikes.
