Mortgage rates creep closer to 6% – lowest level since early 2023

The average rate for a 30-year mortgage in the US approached 6% this week to the lowest level since early February 2023.

The rate fell to 6.09% from 6.20% last week, mortgage buyer Freddie Mac said Thursday.

A year ago, the rate averaged 7.19%.

The last time the average rate was this low was in February. 2, 2023.

Borrowing costs for 15-year fixed-rate mortgages, popular with homeowners looking to refinance their home loans at a lower rate, also eased this week.

The average rate fell to 5.15% from 5.27% last week.

A year ago, it averaged 6.54%, Freddie Mac said.

Mortgage rates are affected by several factors, including how the bond market reacts to the Fed’s interest rate policy decisions.

That could move the trajectory of the 10-year Treasury yield, which lenders use as a guide for pricing home loans.

Rates have been largely easing since July, as signs of easing inflation and a cooling labor market raised expectations for a Fed rate cut, pushing the yield on the 10-year Treasury lower.

That rate cut came Wednesday as the Federal Reserve cut its key interest rate for the first time in more than four years.

Fed officials also signaled they expect further cuts this year and in 2025 and 2026.

Rate cuts should, over time, lead to lower borrowing costs for mortgages.

The recent rate hike should help spur demand for refinancing and home-buying loans, said Sam Khater, Freddie Mac’s chief economist.

“While mortgage rates do not directly track the Federal Reserve’s moves, this first cut in more than four years will have an impact on the housing market,” Khater said. “The decline in mortgage rates over the past several weeks indicates that this reduction has been mostly achieved, but we expect rates to fall further, spurring more housing activity.â€

After climbing to a 23-year high of 7.79% in October, the average rate for a 30-year mortgage has hovered around 7% for most of this year — more than double what it was just three years ago. before.

Elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have put off many would-be homebuyers, extending the nation’s housing slump into a third year. US foreclosed home sales fell in August even as mortgage rates began to ease.

However, as rates have eased, more homeowners have applied for loans to refinance their mortgages. Applications for refinance loans rose 24% last week, according to the Mortgage Bankers Association.

Economists generally expect mortgage rates to remain near their current levels, at least this year. Fannie Mae said this week that it expects the rate for a 30-year mortgage to average 6.2% in the October-December quarter and fall to an average of 5.7% in the same quarter next year. It averaged 7.3% over the same period in 2023.