Prospective homebuyers are getting a small break this week as the average rate on a 30-year fixed mortgage dropped to its lowest point in nearly two months.
Freddie Mac reported Thursday that the benchmark 30-year fixed mortgage rate slipped to 6.43%, down from 6.49% the previous week. At this same time last year, that rate stood at 6.67%.
For much of the period since the conflict between the United States and Iran broke out in late February, the average rate has largely stayed near 6.5%. The war has disrupted crude oil shipments out of the Persian Gulf, pushing oil prices sharply upward and contributing to higher inflation, rising bond yields, and elevated mortgage rates.
Even with this week’s modest dip, the current rate is the lowest recorded since May 14, when it sat at 6.36%.
Rates on 15-year fixed mortgages — a popular option for homeowners looking to refinance — also moved lower. That average fell to 5.79% from 5.84% last week. One year ago, it was at 5.8%, Freddie Mac noted.
Several factors shape where mortgage rates land, including decisions made by the Federal Reserve on interest rate policy and expectations among bond market investors about inflation and the broader economy. Mortgage rates tend to track closely with the 10-year Treasury yield, which lenders rely on when setting home loan prices.
By midday Thursday, the 10-year Treasury yield had dipped to 4.46%, down slightly from 4.48% the evening before.
Growing optimism that the U.S. and Iran could eventually reach a resolution to end their conflict — and reopen the Strait of Hormuz to oil tankers — has helped bring oil prices down somewhat, easing some of the upward pressure on bond yields. Still, yields remain well above where they were in late February, when the 10-year Treasury yield was around 3.97%.
Just before the war began in late February, the 30-year mortgage rate had briefly dipped below 6% for the first time since late 2022. It has not returned to that level since. Five weeks ago, the rate climbed to 6.53%, its highest point since August 28.
Although long-term mortgage rates are still lower than they were a year ago, the uncertainty created by the ongoing conflict has kept many potential buyers from moving forward with a home purchase.
Sales of previously owned homes across the country fell during the first quarter of this year compared to the same period a year ago, continuing a housing slowdown that has persisted since 2022, when rates began rising from their pandemic-era lows. April sales were essentially unchanged, but May saw a pickup — the fastest pace of sales since December.
Even so, existing home sales are still hovering near an annual rate of 4 million — well below the historical norm of around 5.2 million.
