The average interest rate on a 30-year mortgage fell again this week, continuing a welcome trend for would-be homebuyers facing record-high home prices.
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By Alex Veiga AP Business Reporter
June 27, 2024 12:01 PM ET
• 3 min read
LOS ANGELES — The average interest rate on a 30-year mortgage fell again this week, continuing a welcome trend for prospective homebuyers as home prices reach record highs.
Mortgage buyer Freddie Mac said Thursday that interest rates fell to 6.86 percent from 6.87 percent last week. The average rate a year ago was 6.71 percent.
That's the fourth straight week of declines for interest rates, which have mostly hovered around 7% this year. Home sales have fallen in recent months as rising rates, which can add hundreds of dollars to borrowers' costs each month, discourage more homebuyers from buying.
U.S. existing home sales fell for the third consecutive month in May. Sales of new single-family homes fell 7.7% and 16.5% year-over-year in April and May, respectively.
“The 30-year fixed-rate mortgage continues to trend downwards, hitting its lowest level in nearly three months,” Freddie Mac chief economist Sam Carter said. “Historically, with the economy performing well, we expect interest rates to continue to fall through the summer, bringing homebuyers back into the market.”
Mortgage rates depend on several factors, including how the bond market reacts to the Federal Reserve's interest rate policy and movements in the 10-year Treasury yield, which lenders use as a guide for pricing mortgages.
Yields that rose above 4.7% in late April have mostly retreated in recent days following economic data showing slowing growth, which could help tame inflationary pressures and prompt the Federal Reserve to start cutting its key interest rate from its highest level in more than two decades.
Earlier this month, Fed officials said inflation had been approaching its 2% target in recent months, signaling they expected to cut their benchmark interest rate once this year. The Fed previously projected up to three cuts in 2024, raising hopes in the housing market that mortgage rates might have fallen further by now.
With just one rate cut expected by the end of the year, “relief may be too little, too late for many first-time homebuyers,” said Jiayi Xu, economist at Realtor.com.
“For home buyers and sellers, the peak in mortgage interest rates appears to have passed, but volatility risks remain, complicating relocation decisions,” Xu said.
As interest rates have eased in recent weeks, so have the monthly payments that homebuyers agree to make when applying for a mortgage.
The national average monthly payment listed on mortgage applications in May was $2,219, down 1.6 percent from the previous month but up 2.5 percent from May of last year, according to the Mortgage Bankers Association.
The MBA predicts mortgage rates will fall to near 6.5% by the end of the year.
With about 90% of homes with mortgages having interest rates below 6%, that may not be enough to entice homeowners who bought or refinanced their homes when rates were below 4% or 3% to sell.
Meanwhile, interest rates on 15-year fixed-rate mortgages, popular with homeowners looking to refinance their mortgages, rose this week. Rates averaged 6.16% this week, up from 6.13% last week. The average rate a year ago was 6.06%, according to Freddie Mac.