The long-term mortgage rates in the United States saw a slight decline this week, ending a six-week streak of increases. Despite the borrowing costs still being higher than a year ago, the trend of falling mortgage rates has temporarily eased the minds of potential home buyers.
According to Freddie Mac, a leading mortgage financing organization in the U.S., the average rate for a 30-year fixed-rate mortgage decreased from 6.69% last week to 6.67% as of August 13th. This marks the first downward trend in rates for this popular long-term loan in six weeks, although it remains higher than the average rate of 6.58% from the same period last year.
The average rate for a 15-year fixed-rate mortgage also slightly dropped this week from 6.01% to 5.96%, yet it remains higher than the 5.71% rate from a year ago. This type of loan is typically favored by borrowers looking to refinance their home mortgages.
Sam Khater, the Chief Economist of Freddie Mac, believes that the current rate situation is a positive factor for potential home buyers. He stated in a release that “housing affordability has improved compared to a year ago, and recent increases in purchase and refinance applications indicate that borrowers will continue to respond even to small changes in mortgage rates.”
Mortgage rates are influenced by multiple factors, including the Federal Reserve’s interest rate policies, bond market investors’ expectations of the economy and inflation, often tracking the 10-year U.S. Treasury yield, which is a key benchmark for mortgage pricing.
Similar to the recent trend in mortgage rates, the 10-year U.S. Treasury yield has also experienced a decline. As of Thursday’s midday trading, the yield decreased to 4.61%, down from 4.72% earlier in the week.
Higher mortgage rates can increase borrowers’ monthly costs by hundreds of dollars, limiting buyers’ purchasing power. This could lead potential buyers to delay their purchases, as seen in the past few weeks when mortgage rates were on the rise. In July, existing home sales in the U.S. slowed down once again.
Recent economic data released for July indicate a soft labor market and easing inflation, lowering the likelihood of a Fed rate hike next month.
While the Federal Reserve does not directly control mortgage rates, its actions in interest rate policy directly affect the 10-year Treasury yield, indirectly impacting the level of mortgage rates.