Average rate on a 30-year mortgage eases again, offering modest relief for home shoppers
Borrowing costs on 15-year fixed-rate mortgages popular with homeowners refinancing their home loans also eased. The average rate dropped to 5.85 percent from 5.87 percent last week. A year ago it was 5.99 percent Freddie Mac said. Elevated mortgage rates continue to weigh on the US 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 percent at midday Thursday down from 4.37 percent 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 percent 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 US 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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