Rates for Long-Term Mortgages in the U.S. Decline

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

Since mid-May, the average rate has hovered around 6.5% and has generally trended upward due to the U.S. conflict with Iran, which began in late February. This conflict has driven up oil prices, contributing to higher inflation, bond yields, and mortgage rates.

Currently, the average rate is at its lowest since May 14, when it stood at 6.36%. Costs for 15-year fixed-rate mortgages, often sought by borrowers refinancing home loans, also declined this week, dropping from 5.84% last week to 5.79%. Last year, this rate was 5.8%, according to Freddie Mac.

Mortgage rates are influenced by several factors, including Federal Reserve decisions and bond market investors’ expectations regarding the economy and inflation. They typically follow the path of the 10-year Treasury yield, which lenders use to price home loans. The 10-year Treasury yield was 4.46% at midday Thursday, slightly down from 4.48% late Wednesday.

Hopes that the U.S. and Iran might end their conflict and reopen the Strait of Hormuz to oil tanker traffic have helped reduce oil prices, easing some pressure on bond yields. In late February, the average 30-year mortgage rate dipped just below 6% for the first time since the end of 2022, but it has stayed above that level since then. Five weeks ago, it reached 6.53%, its highest since August 28.

Despite being lower than this time last year, long-term mortgage rates are still uncertain amid the conflict with Iran, keeping many potential homebuyers on the sidelines. “Buyers and sellers are starting to accept mid-6% rates as the new normal,” said Lisa Sturtevant, chief economist at Bright MLS. “However, affordability remains a significant constraint on the housing market’s activity, as rates stay high and home prices keep rising.”