Mortgage Rates Decline to Lowest Level Since May

The average rate for long-term mortgages in the United States dropped this week to its lowest point since mid-May. This brings relief to potential homebuyers facing borrowing costs. The benchmark 30-year fixed-rate mortgage decreased from 6.49% last week to 6.43%, according to mortgage buyer Freddie Mac. A year ago, the average rate was 6.67%.

Since mid-May, the average rate has hovered around 6.5%. This trend has generally increased in the months following the conflict between the US and Iran that began in late February. Rising oil prices have contributed to inflation, bond yields, and mortgage rates.

The current average rate is the lowest since May 14, when it was at 6.36%. Fixed 15-year mortgage rates, often preferred by those refinancing, also dipped this week. The average rate for these loans dropped from 5.84% last week to 5.79%. A year ago, it was 5.8%, Freddie Mac reported.

Several factors influence mortgage rates. These include Federal Reserve decisions and bond market investors’ economic and inflation expectations. Mortgage rates usually follow the 10-year Treasury yield, which lenders use as a reference for setting home loan pricing. The 10-year Treasury yield stood at 4.46% at noon Thursday, down from 4.48% late Wednesday.

There is hope that the US and Iran might eventually end their conflict and reopen the Strait of Hormuz to oil tankers. This possibility has helped lower oil prices, easing some pressure on bond yields. In late February, the average 30-year mortgage rate dipped just under 6% for the first time since late 2022 but has not fallen below that threshold since. Five weeks ago, it reached 6.53%, its highest level since August 28.

Despite long-term mortgage rates being lower than they were a year ago, uncertainty about their trend amid the war with Iran has kept many potential homebuyers on the sidelines. “Buyers and sellers are starting to accept mid-6% rates as the new normal,” stated Lisa Sturtevant, chief economist at Bright MLS. “However, affordability remains a significant constraint on the housing market activity, with rates still high and home prices continuing to climb.”