By ALEX VEIGA, AP Business Writer
The average rate on a 30-year U.S. mortgage eased to where it was three weeks ago, modest relief for prospective homebuyers challenged by rising home prices and stubbornly high borrowing costs.
The long-term rate slipped to 6.72% from 6.74% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.73%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also eased. The average rate dropped to 5.85% from 5.87% last week. A year ago, it was 5.99%, Freddie Mac said.
Elevated mortgage rates continue to weigh on the U.S. housing market, which has been in a sales slump going back to 2022, when rates started to climb from the rock-bottom lows they reached during the pandemic.
Mortgage rates are influenced by several factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations for the economy and inflation.
The main barometer is the 10-year Treasury yield, which lenders use as a guide to pricing home loans. The yield was at 4.34% at midday Thursday, down from 4.37% late Wednesday.
Yields moved higher most of July as traders bet that the Fed would keep its key short-term interest rate unchanged at its meeting this month.
On Wednesday, the central bank’s policymaking committee voted to hold its main interest rate steady. And Fed Chair Jerome Powell pushed back on expectations that the Fed could cut rates at its next meeting in September, pointing to how inflation remains above the Fed’s 2% target, while the job market still looks to be “in balance.”
A cut in rates would give the job market and overall economy a boost, but it could also fuel inflation just as the Trump administration’s tariffs risk raising prices for U.S. consumers.
“If a September rate cut starts to be more likely, it is possible that we could see mortgage rates edge downward at the end of the summer, similar to what we saw last year at this time,” said Lisa Sturtevant, chief economist at Bright MLS. “If inflation expectations continue to be high, mortgage rates could also remain higher.”
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