Average US long-term mortgage rate edges lower, remaining near its low for the year
The average rate on a 30-year U.S. mortgage edged lower this week, staying relatively close to its low for the year.
The decline brings the average long-term mortgage rate to 6.21% from 6.22% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.72%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell this week. The rate averaged 5.47%, down from 5.54% last week. A year ago, it averaged 5.92%, Freddie Mac said.
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. They generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.
The 10-year yield was at 4.12% at midday Thursday, unchanged from a week ago.
The average rate on a 30-year mortgage has been mostly holding steady in recent weeks since it dropped to 6.17%, its lowest level in more than a year, on Oct. 30.
Mortgage rates began easing in July in anticipation of a series of Fed rate cuts, which began in September and continued this month. An encouraging report on inflation on Thursday could give the central bank cause to keep cutting interest rates next year.
The Fed doesn’t set mortgage rates, but when its cuts its short-term rate that can signal lower inflation or slower economic growth ahead, which can drive investors to buy U.S. government bonds. That leads to lower yields on long-term U.S. Treasurys, which helps lower mortgage rates.
Still, Fed rate cuts don’t always translate into lower mortgage rates. That’s what happened in the fall of 2024 after the central bank cut its main rate for the first time in more than four years. Instead of falling, mortgage rates marched higher, eventually cresting above 7% in January this year. At that time, the 10-year Treasury yield was climbing toward 5%.