Home loan financing costs have decreased as the average long-term US mortgage rate hit a four-month low, according to reports from Los Angeles.
The average 30-year mortgage rate fell to 7.03% from 7.22% last week, according to Freddie Mac. It was 6.33% last year.
The average borrowing rate has decreased this week and is now lower than it was in early August. The new rate is 6.96%. Additionally, homeowners refinancing their home loan can benefit from lower borrowing costs on 15-year fixed-rate mortgages. The average rate for such loans is now 6.29%, which is a drop from last week’s rate of 6.56%. A year ago, the average rate for a 15-year fixed-rate mortgage was 5.67%, according to Freddie Mac.
Rates have dropped for the sixth consecutive week, following a decline in the 10-year Treasury yield. Lenders use this yield to determine the pricing of loans. The yield had spiked in mid-October to its highest level since 2007 but has since been decreasing as the Federal Reserve aims to control lower inflation by potentially ending interest rate hikes.
Freddie Mac’s chief economist, Sam Khater, said that although the lower rates are a welcome relief, they will need to drop further to consistently reinvigorate demand.
The average rate for a 30-year home loan exceeded 6% in September 2022 and has remained above that level since then. In late October, it reached a record high of 7.79%.
The recent drop in mortgage rates is a positive development for potential homebuyers struggling with a housing market that remains unaffordable for many Americans.
Although sales of previously owned U.S. homes have decreased by 20.2% during the first 10 months of this year, home prices have continued to rise due to an insufficient supply of available properties. However, with the easing of mortgage rates, borrowers’ purchasing power is increasing, allowing them to afford more expensive homes.
The average rate on a 30-year home loan is still high compared to two years ago, when it was 3.10%. This significant difference in rates is causing a shortage of available homes for sale, as homeowners who secured low rates two years ago are choosing not to sell.
According to the Mortgage Bankers Association, mortgage applications have increased for the fifth consecutive week, thanks to the recent dip in rates. Many housing economists are predicting that mortgage rates will continue to decrease in 2024. However, they believe that the average rate on a 30-year home loan will still be above 6%, which is about twice the average rate from two years ago.
