Mortgage rates fall to lowest since September

The average long-term mortgage rate fell this week to its lowest level since September, a potential boost to a housing market that has been in a downturn for nearly a year.

Mortgage buyer Freddie Mac said on Thursday that the average interest rate on 30-year loans fell to 6.15% from 6.33% last week. A year ago, the average was 3.56%.

In the fall, the average long-term rate hit a two-decade high of 7.08% as the Federal Reserve continued to raise its key lending rate in its bid to cool the economy and tame inflation.

Soaring mortgage rates last year choked the housing market, with sales of existing homes falling 10 straight months to their lowest level in more than a decade.

Although housing prices have declined due to lower demand, they are still almost 11% higher than a year ago. Higher prices and doubling mortgage rates have made home buying much less affordable for many people, but recent rate cuts may give some buyers renewed hope.

“Rates are at their lowest level since last September, boosting both homebuyer demand and builder sentiment,” said Sam Hater, chief economist at Freddie Mac. “Declining rates provide a much-needed boost to the housing market, but home supply remains an ongoing challenge.”

At its last meeting in 2022, the Federal Reserve raised rates by 0.50 percentage points, the seventh increase in the past year. This pushed the central bank’s key rate to a range of 4.25% to 4.5%, the highest level in 15 years.

While consumer-level inflation has been declining for six straight months, Fed officials have signaled that they could raise the central bank’s prime borrowing rate by another three-quarters of a point in 2023, in the range of 5% to 5.25%.

30-year mortgage rates typically track changes in 10-year Treasury yields, which lenders use as a benchmark for valuing loans. Investor expectations about future inflation, global demand for US Treasury bonds and what the Federal Reserve is doing with interest rates can also influence the cost of a home loan.

The 15-year mortgage rate, popular with those who refinance their homes, also fell this week to 5.28% from 5.52% last week. A year ago it was 2.79%.