The average rate on a 30-year mortgage in the U.S. eased again this week, slipping to its lowest level since late October.
The rate dropped to 6.69% from 6.81% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 7.03%.
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Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners seeking to refinance their home loan to a lower rate, also eased this week. The average rate fell to 5.96% from 6.1% last week. A year ago, it averaged 6.29%, Freddie Mac said.
Mortgage rates are influenced by several factors, including the moves in the yield on U.S. 10-year Treasury bonds, which lenders use as a guide to price home loans.
The average rate on a 30-year mortgage is now at its lowest level since October 24, when it was at 6.54%.
Mortgage rates have been mostly rising in recent weeks since sliding to a two-year low of 6.08% in late September after the Federal Reserve cut its benchmark interest rate from a two-decade high for the first time in more than four years. While the central bank doesn’t set mortgage rates, its actions and the trajectory of inflation influence the moves in the 10-year Treasury yield.
Many expect that the Fed will cut its main interest rate again when it meets in two weeks.
Elevated mortgage rates and rising home prices have kept homeownership out of reach of many would-be homebuyers. U.S. home sales are on track for their worst year since 1995.
Despite an overall uptick in mortgage rates since September, applications for a home loan have been rising. Mortgage applications rose 2.8% last week from the previous week, adjusting for the Thanksgiving holiday, according to the Mortgage Bankers Association.
And the MBA’s seasonally adjusted index of purchase loan applications rose for the fourth week in a row last week, reaching its highest level since January.
“The recent strength in purchase activity continues, supported by lower rates and higher inventory levels, which are giving prospective buyers more options compared to earlier in the year,” said Joel Kan, MBA’s deputy chief economist.
Still, with home prices near all-time highs and still rising nationally, albeit more slowly, many would-be homebuyers are likely holding out for mortgage rates to ease further in coming months.
But there may not be much relief, given that many housing economists predict the average rate on a 30-year mortgage will generally hover around 6.5% next year.
"With home prices expected to rise and rates projected to remain in the 6s through 2025, many of those buyers will still be priced out,” said Lisa Sturtevant, chief economist at Bright MLS.