Average mortgage rate falls to lowest level since early April

Home loan borrowing costs eased again this week as the average rate on a 30-year mortgage declined to its lowest level since early April.

The rate fell to 6.87% from 6.95% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.67%.

This is the third straight weekly decline in the average rate, which has mostly hovered around 7% since April. Higher mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting homebuyers’ purchasing options.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also eased this week, lowering the average rate to 6.13% from 6.17% last week. A year ago, it averaged 6.03%, Freddie Mac said.

“Mortgage rates fell for the third straight week following signs of cooling inflation and market expectations of a future Fed rate cut,” said Sam Khater, Freddie Mac’s chief economist.

Home loan 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.

Yields have mostly eased recently following some economic data showing slower growth, which could help keep a lid on inflationary pressures and convince the Federal Reserve to begin lowering its main interest rate from its highest level in more than 20 years.

Federal Reserve officials said last week that inflation has fallen further toward their target level of 2% in recent months and signaled that they expect to cut their benchmark interest rate once this year. The central bank had previously projected as many as three cuts in 2024.

Until the Fed begins lowering its short-term rate, long-term mortgage rates are unlikely to ease significantly, economists say.

The average rate on a 30-year mortgage remains near a two-decade high, discouraging many would-be homebuyers. The elevated rates contributed to a lackluster spring homebuying season. Sales of previously occupied U.S. homes fell in March and April as home shoppers contended with rising borrowing costs and prices.

-- The Associated Press