The average rate on a 30-year U.S. mortgage edged lower this week, staying close to its low for the year.
Freddie Mac reported the rate fell to 6.21% from 6.22% last week.
A year ago, the average was 6.72%, showing a notable decline.
The average 15-year fixed-rate mortgage also slipped this week.
Freddie Mac said the rate averaged 5.47%, down from 5.54% last week.
One-year-ago average was 5.92%, indicating a steady easing trend.
The 10-year Treasury yield held steady at 4.12% at midday Thursday.
The level remained unchanged from a week ago.
The yield serves as a benchmark for mortgage pricing.
The 30-year mortgage rate has mostly held steady in recent weeks since it dropped to 6.17% on Oct. 30.
That level represents the lowest in more than a year.
The rate has hovered near that threshold, reflecting market stability.
Mortgage rates began easing in July amid expectations of a series of Fed rate cuts.
The cuts started in September and continued this month.
The easing trend was driven by anticipatory market behavior.
An encouraging report on inflation released Thursday could give the Fed cause to keep cutting rates next year.
The data signals potential for lower inflation expectations.
Such expectations may influence bond market activity.
The Fed does not set mortgage rates, but when it cuts its short-term rate it can signal lower inflation or slower economic growth ahead.
This can drive investors to buy U.S. government bonds.
Lower bond yields can result in lower mortgage rates.
However, Fed rate cuts don’t always translate into lower mortgage rates.
In the fall of 2024, after the central bank cut its main rate for the first time in more than four years, mortgage rates marched higher.
They eventually cresting above 7% in January, while the 10-year Treasury yield was climbing toward 5%.
This year’s late-summer pullback in rates helped lift sales of previously occupied U.S. homes in October on an annual basis for the fourth straight month.
The decline in rates made borrowing cheaper for many buyers.
The result was a modest uptick in home sales.
Home shoppers who can afford to pay cash or finance at current mortgage rates are in a more favorable position than they were a year ago.
The ability to secure lower rates improves affordability for many buyers.
This advantage is reflected in the current market activity.
Home listings are up sharply from last year, and many sellers have resorted to lowering their initial asking price as homes take longer to sell, according to data from Realtor.com.
The increased inventory provides buyers with more options.
It also creates a more competitive environment for sellers.
“Mortgage rates have eased into the low-6% range and inventory remains well above last year’s levels, giving buyers more options and greater flexibility,” said Hannah Jones, senior economic research analyst at Realtor.com.
Jones highlights the positive impact of lower rates on the housing market.
She notes that inventory levels continue to support buyer confidence.
Still, affordability remains a challenge for many aspiring homeowners, especially first-time buyers who don’t have equity from an existing home to put toward a new home purchase.
The lack of equity limits the amount buyers can borrow at favorable rates.
This situation underscores the ongoing hurdles in the housing market.
Uncertainty over the economy and job market are also keeping many would-be buyers on the sidelines.
Economic volatility can affect buyers’ confidence and willingness to commit.
The market continues to monitor these factors closely.
Homeowners eager to refinance their home loan to a lower rate have benefited from easing mortgage rates.
The lower rates reduce monthly payments and overall interest costs.
Refinancing activity has increased as a result.
Applications for mortgage refinance loans made up 59% of all home loan applications last week, the highest level since September, according to the Mortgage Bankers Association.
This surge reflects the attractiveness of lower rates for existing homeowners.
The data indicates a strong preference for refinancing over new purchases.
Economists generally forecast that the average rate on a 30-year mortgage will remain slightly above 6% next year.
The forecast suggests modest stability in long-term rates.
Market participants will watch for any shifts in Fed policy.
The 30-year average has remained near its yearly low since October, reflecting persistent market conditions.
The rate has not deviated significantly from that level.
It demonstrates the resilience of the mortgage market.
The 15-year rate decline mirrors the trend seen in the 30-year, indicating refinancing activity.
Both rates have moved in tandem, underscoring broader market dynamics.
This parallel movement supports the view that borrowers are seeking lower rates.
The unchanged 10-year yield suggests that short-term Fed actions are not yet fully reflected in long-term Treasury pricing.
Bond market participants are awaiting further signals from the central bank.
The yield’s stability contributes to mortgage rate steadiness.
Key Takeaways
- 30-year mortgage rates dipped to 6.21%, 15-year rates fell to 5.47%.
- Fed cuts and inflation data shape the market, guiding mortgage pricing.
- Refinancing activity remains high, with 59% of loan applications for refinance.
In summary, U.S. mortgage rates have edged lower, reflecting a mix of Fed policy, inflation expectations, and market demand.
While borrowers enjoy better rates today, long-term forecasts suggest rates will stay just above 6% in the coming year.
The housing market continues to adjust as inventory levels and economic uncertainty shape buyer behavior.
With rates near a year-low and refinancing at its highest since September, homeowners have a unique opportunity to lock in favorable terms.
However, first-time buyers still face affordability hurdles.
Market watchers will keep an eye on Fed actions and bond yields for future rate movements.
