The average rate on a 30-year fixed U.S. mortgage decreased again, back to where it was about three weeks ago. Mortgage buyer Freddie Mac provided the latest example on Thursday, reporting that the average rate shot back up to 7.09%. This is a drop of about 12 basis points from last week’s rate of 7.11%. Even with this recent drop, the 30-year mortgage rate is still close to this year’s peak. It currently remains around 7.2%, a high point that was hit in mid-January.
This steady respite in mortgage rates follows a rocky patch earlier in the year. Each 30-year rate reached a bottom of 6.62% in early April. This short-lived drop was a reminder of the market’s fickleness. Homebuyers and industry analysts aren’t popping the champagne just yet, as these elevated rates are still doing plenty of damage to the U.S. housing market.
You’ve probably heard of the trend away from 30-year mortgages. In the meantime, the average rate on 15-year fixed-rate mortgages fell for the week. This week, it decreased from 5.87% to 5.85%. The 30-year fixed-rate mortgage is an essential financial tool to a large swath of home buying consumers. This week, it fell again, down to 6.72%, a drop from 6.74% last week.
The current 5.63 percent average rate is up over a year ago. It was 6.73% for a 30-year fixed mortgage a year ago, and only 5.99% two years ago. Future projected path suggests that rates will remain above 6% for the remainder of 2023. This development is largely a function of major economic indicators, most notably the 10-year Treasury yield.
As of midday Thursday, the yield on the 10-year Treasury was 4.34%, a bit lower than 4.37% late Wednesday. This yield is the main indicator of future movement in mortgage rates and has moved north and south quickly based on capital market forces. Yields rose sharply over the course of July. Economic data released this week bolstered optimism among traders that the Federal Reserve would leave its key short-term interest rate unchanged at its next meeting.
Even with this recent relief on mortgage rates, the housing market has still faced an uphill battle. Mortgage applications fell 3.8% last week from the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association’s weekly application survey. They’re down 21.8% from this time last year. Despite these factors, housing sales have been in decline since late 2022. This economic collapse takes the form of rising interest rates and inflation, rattling consumer confidence.
Joel Kan, deputy chief economist, emphasized the impact of these uncertainties on potential homebuyers:
“There is still plenty of uncertainty surrounding the economy and job market, which is weighing on prospective homebuyers’ decisions.”
Lisa Sturtevant, chief economist at Bright MLS, noted the potential for adjustments in rates:
“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.”
