LOS ANGELES — The average interest rate on a 30-year mortgage fell to just under 7% this week, offering little relief to potential homebuyers already dealing with the challenges of rising home prices and a relatively limited supply of homes on the market.
Interest rates fell to 6.99% from 7.03% last week, mortgage buyer Freddie Mac said Thursday. A year ago the average was 6.71%.
Borrowing costs for 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell this week, dropping the average interest rate to 6.29% from 6.36% last week. A year ago, it averaged 6.07%, Freddie Mac said.
Mortgage rates are affected by several factors, including how the bond market responds to the Federal Reserve's interest rate policy and movements in 10-year Treasury yields, which lenders use to guide the pricing of home loans.
Yields fell this week after economic data showed slower growth. Signs that the economy is cooling could push inflation lower, which could convince the Federal Reserve to cut short-term interest rates from the highest level in more than two decades.
The Fed, which will hold its next policy meeting next week, has insisted it has no plans to cut rates until it has more confidence that price increases will slow sustainably to the 2% target. Until then, mortgage rates are unlikely to fall significantly, economists say.
“Overall, we expect inflation to continue to slow and mortgage rates could fall to around 6.5% by late 2024 or early 2025,” said Ralph McLaughlin, senior economist at Realtor.com.
The average interest rate on a 30-year mortgage is still at a 20-year high, adding hundreds of dollars per month in mortgage costs and limiting homebuyers' purchasing options.
Increased mortgage interest rates have dampened home sales this spring. Sales of previously occupied U.S. homes fell March And April while home buyers faced rising borrowing costs and prices.
As interest rates have gotten higher, so have the monthly payments home buyers have to make when applying for a mortgage.
According to data from the Mortgage Bankers Association, the national average monthly payment listed on home loan applications was $2,256 in April, up 2.5% from the previous month and 6.8% higher than a year earlier.
