LOS ANGELES (AP) — The average rate on a 30-year mortgage dropped this week to a four-month low, a welcome decline in borrowing costs for prospective homebuyers grappling with the challenge of record-high home prices and a dearth of properties on the market.
The rate fell to 6.77% from 6.89% last week, mortgage buyer Freddie Mac said Thursday. A year ago, it averaged 6.78%.
This is the second straight weekly drop in the average rate. It's now at the lowest level since mid March, when it averaged 6.74%.
“Mortgage rates are headed in the right direction and the economy remains resilient, two positive incremental signs for the housing market,” said Sam Khater, Freddie Mac’s chief economist.
Mortgage rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy and the moves in the 10-year Treasury yield, which lenders use as a guide to pricing home loans.
After jumping to a 23-year high of 7.79% in October, the average rate on a 30-year mortgage has mostly hovered around 7% this year — more than double what it was just three years ago.
The elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers this year, extending the nation's housing slump into its third year. Sales of previously occupied U.S. homes fell in May for the third month in a row, and indications are that June saw a pullback as well.
Mortgage rates have eased recently as signs of cooling inflation have heightened expectations that the Federal Reserve will cut its benchmark rate in September. The central bank has been keeping its main interest rate at the highest level in more than two decades in hopes of slowing the economy just enough to get inflation fully under control.
Home loan rates have eased as the yield on the 10-year Treasury note, which topped 4.7% in late April, has moved lower on hopes of a Fed rate cut. It was at 4.17% in midday trading in the bond market.
Mortgage rates could ease further in coming weeks if bond yields continue declining in anticipation of a Fed rate cut.
Even so, most economists expect the average rate on a 30-year home loan to remain above 6% this year. That may not be enough of a decline to entice home shoppers who have been holding out for mortgage rates to come down, nor persuade homeowners who have locked in rock-bottom rates that it’s a good time to sell.
“While lower rates will eventually bring more buyers back into the market, there are other factors that are causing buyers to hesitate,” said Lisa Sturtevant, chief economist at Bright MLS. “Home prices have hit record highs in many markets, which will keep some buyers out of the market.”
The recent pullback in home loan rates did help spur a pickup in mortgage applications last week. They rose 4% from a week earlier, according to the Mortgage Bankers Association. That increase included a 15% jump in applications for home refinancing loans, which reached the highest level since August 2022.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, fell this week, pulling the average rate down to 6.05% from 6.17% last week. A year ago, it averaged 6.06%, Freddie Mac said.
The Federal Reserve cut its key interest rate Wednesday for a second time this year as it seeks to shore up economic growth and hiring even as inflation stays elevated. The move comes amid a fraught time for the central bank, with hiring sluggish and yet inflation stuck above the Fed’s 2% target. Compounding its challenges, the central bank is navigating without much of the economic data it typically relies on from the government. The Fed has signaled it may reduce its key rate again in December but the data drought raises the uncertainty around its next moves. Fed Chair Jerome Powell told reporters that there were “strongly differing views” at the central bank's policy meeting about to proceed going forward.
The Federal Reserve will almost certainly cut its key interest rate on Wednesday and could signal it expects another cut in December as the central bank seeks to bolster hiring. A cut Wednesday would be the second this year and could benefit consumers by bringing down borrowing costs for mortgages and auto loans. Since Fed chair Jerome Powell strongly signaled in late August that rate cuts were likely this year, the average 30-year mortgage rate has fallen to about 6.2% from 6.6%. Still, the Fed is navigating an unusual period for the U.S. economy and its future moves are harder to anticipate than is typically the case.
Stocks are rallying toward more records ahead of a week packed with potentially market-moving events. The S&P 500 rose 1% Monday. The Dow Jones Industrial Average added 224 points, and the Nasdaq composite jumped 1.7%. Stocks also climbed in Asia ahead of a meeting on Thursday between the heads of the United States and China. The hope is that the talks could clear rising tensions between the world’s two largest economies. This upcoming week will feature profit reports from some of Wall Street's most influential companies and a meeting by the Federal Reserve on interest rates. Gold fell back toward $4,000 per ounce.
U.S. and Chinese officials say a trade deal between the world’s two largest economies is drawing closer. The sides have reached an initial consensus for President Donald Trump and Chinese leader Xi Jinping to aim to finalize during their high-stakes meeting Thursday in South Korea. Any agreement would be a relief to international markets. Trump's treasury secretary says discussions with China yielded preliminary agreements to stop the precursor chemicals for fentanyl from coming into the United States. Scott Bessent also says Beijing would make “substantial” purchases of soybean and other agricultural products while putting off export controls on rare earth elements needed for advanced technologies.
Some seniors say the Social Security Administration's cost-of-living adjustment won’t help much in their ability to pay for their daily expenses. The agency announced Friday the annual cost-of-living adjustment will go up by 2.8% in 2026, translating to an average increase of more than $56 for retirees every month. Eighty-year-old Florence, South Carolina, resident Linda Deas says it does not match the current "affordability crisis.” The benefits increase will go into effect for Social Security recipients beginning in January. Friday’s announcement was meant to be made last week but was delayed because of the federal government shutdown. Recipients got a 2.5% COLA boost in 2025 and a 3.2% increase in 2024.
Wall Street is heading for records after an update said U.S. households are feeling a bit less pain from inflation than feared. The S&P 500 climbed 1% Friday and was on track to top its all-time high set earlier this month. The Dow Jones Industrial Average jumped 529 points, and the Nasdaq composite rose 1.3%. Both are also heading toward records. The inflation data could clear the way for the Federal Reserve to keep cutting interest rates in hopes of helping the slowing job market. A strong earnings reports from Ford Motor and continued gains for AI stars also drove stocks higher.
