Prospective homebuyers received encouraging news this week as the typical 30-year home loan rate dropped slightly after hitting its peak level in nine months.
Mortgage buyer Freddie Mac reported Thursday that the standard 30-year fixed mortgage rate decreased to 6.48% from the previous week’s 6.53%. Despite this decline, current rates still sit below the 6.85% level recorded one year ago.
Lower mortgage rates provide homebuyers with increased purchasing power when shopping for properties.
Rate increases have been the dominant trend since the conflict with Iran started, which has disrupted oil tanker routes through the Persian Gulf to global markets. This disruption has driven oil prices significantly higher, becoming a major factor in rising inflation.
Multiple elements affect mortgage rates, including Federal Reserve policy choices and bond market investor sentiment regarding economic growth and inflation prospects. These rates typically mirror movements in the 10-year Treasury yield, which serves as a benchmark for lenders when setting home loan prices.
Continued expectations of rising oil costs due to the prolonged conflict have maintained elevated long-term bond yields, pushing mortgage rates generally upward.
Thursday’s midday bond market trading showed the U.S. 10-year Treasury note yield at 4.47%, climbing from 4.45% the previous week. This represents a significant increase from the 3.97% level recorded in late February before the conflict started.
In late February, the typical 30-year mortgage rate had dropped just below 6% for the first time since late 2022, but hasn’t returned to that level since. The previous week saw rates jump to their highest point since August 28, when they reached 6.56%.
Although current long-term mortgage rates remain below last year’s levels, their recent climb has negatively affected home sales throughout this year.
April sales of existing U.S. homes remained virtually unchanged after decreasing compared to the previous year during the first quarter, continuing a national housing downturn that began in 2022 when rates started rising from pandemic-era lows. Next week will bring the May existing home sales report.
