Mortgage rates drop for the first time in six weeks

The average long-term mortgage in the United States fell slightly this week after five consecutive weeks of increases, good news for homebuyers as the all-important spring buying season in the housing market begins.

Mortgage buyer Freddie Mac reported on Thursday that the benchmark 30-year average fell back to 6.6% from 6.73% last week. A year ago, the average rate was 4.16%.

The average long-term rate hit 7.08% in the fall – a two-decade high – as the Federal Reserve continued to raise its key rate in an effort to cool the economy and stifle the economy. persistent inflation, high for four decades.

At its first meeting of 2023 in February, the Fed raised its key rate an additional 25 basis points, its eighth increase in less than a year. That pushed the central bank’s key rate into a range of 4.5% to 4.75%, its highest level in 15 years. Many economists expect at least three more increases before the end of the year, although some have lowered those expectations due to the banking crisis that has recently unfolded.

A sign advertises newly built homes in Sudbury, Mass.
Mortgage buyer Freddie Mac reported that the benchmark 30-year average fell back to 6.6% from 6.73% last week.

Although Fed rate hikes impact borrowing rates across the board for businesses and families, 30-year mortgage rates generally track movements in the 10-year Treasury yield, which lenders use as a guide for loan pricing. Investors’ expectations about future inflation, global demand for US Treasuries, and what the Federal Reserve does with interest rates can also affect the cost of borrowing a home.

Treasury yields have fallen since the collapse of two mid-sized US banks, with the 10-year falling to 3.44% on Thursday. The 10-year rate hit 5.07% last week, its highest level since 2007.

The sharp rise in mortgage rates over the past year has rattled the housing market, with sales of existing homes falling for 12 straight months at the slowest pace in more than a dozen years. January sales fell nearly 37% from a year earlier, the National Association of Realtors reported last month.

For 2022 as a whole, NAR reported last month that US existing home sales fell 17.8% from 2021, the weakest year for home sales since 2014 and the biggest annual decline since the start of the housing crisis in 2008.

Higher rates can add hundreds of dollars a month in costs for homebuyers, on top of already high home prices.

The rate for a 15-year mortgage, popular with those refinancing their homes, also fell slightly this week to 5.9% from 5.95% last week. It was 3.39% a year ago.

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