The average rate on a 30-year mortgage fell this week to just below 7% for the first time since mid-April, providing a slight boost to homebuyers trying to weather a housing market slumped by rising prices and relatively few homes available.
Mortgage buyer Freddie Mac said Thursday that interest rates fell to 6.94 percent from 7.02 percent a week earlier. The average rate a year ago was 6.57 percent.
This marks the third consecutive weekly decrease in the average interest rate.
The latest drop follows five straight weeks of increases that pushed the average rate to its highest level since Nov. 30.
Rising mortgage rates can add hundreds of dollars a month to borrowers’ costs and limit homebuyers’ purchasing options.
Borrowing costs for 15-year fixed-rate mortgages, popular among homeowners refinancing their mortgages, also fell this week, with the average rate falling to 6.24% from 6.28% the previous week.
A year ago, the average was 5.97%, Freddie Mac said.
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.
Since then, government bond yields have fallen significantly. Federal Reserve Chairman Jerome Powell He said earlier this month that the central bank remained closer to cutting key interest rates than raising them.
Still, the Fed insists it has no plans to lower interest rates until it has more confidence that inflation is slowing sustainably toward its 2% goal.
Until then, economists say mortgage rates are unlikely to fall significantly.
The average interest rate on a 30-year mortgage rose to a 23-year high of 7.79% in October, but remained below 7% so far this year until last month.
Despite the recent decline, this rate is still well above the 5.25% it was just two years ago.
AP
Last month’s rise in interest rates was an unwelcome development for prospective home buyers, coming in the midst of what is traditionally the busiest time for home sales.
On average, more than one-third of homes sold in a given year are purchased between March and June.
Sales of previously occupied U.S. homes fell in March and April as homebuyers contended with rising mortgage rates and prices.
The Mortgage Bankers Association said mortgage applications rose 1.9 percent last week from the previous week, as mortgage rate cuts this month boosted the number of mortgage applications.
“May was a strong month for the mortgage market, with mortgage rates falling and applications increasing over the past three weeks,” said MBA CEO Bob Broeksmit. “Interest rates below 7 percent are good news for prospective buyers, and MBA expects rates to continue to edge lower through the summer.”
