LOS ANGELES — The average long-term U.S. mortgage rate fell slightly this week, welcome news for home shoppers facing rising prices and a stubbornly low inventory of properties on the market this spring homebuying season.
The average rate on a 30-year mortgage slipped to 6.79% from 6.87% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.32%. The average rate is now at its lowest level in a couple of weeks.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also dipped this week, pulling the average rate to 6.11% from 6.21% last week. A year ago it averaged 5.56%, Freddie Mac said.
“Mortgage rates moved slightly lower this week, providing a bit more room in the budgets of some prospective homebuyers,” said Sam Khater, Freddie Mac’s chief economist. “Regardless, rates remain elevated near 7% as markets watch for signs of cooling inflation, hoping that rates will come down further.”
After climbing to a 23-year high of 7.79% in October, the average rate on a 30-year mortgage has remained below 7% since early December. It got up as high as 6.94% just a month ago, after stronger-than-expected reports on inflation, the job market and the economy clouded the outlook for when the Federal Reserve may begin lowering its short-term interest rate.
Many economists expect that mortgage rates will ultimately ease moderately this year, but that’s not likely to happen before the Fed begins cutting its benchmark interest rate. Last week, the central bank kept its rate unchanged and signaled again that it expects to make three rate cuts this year, but not before it sees more evidence that inflation is slowing.
Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Federal Reserve does with its short-term interest rate can influence rates on home loans.
The rise in mortgage rates most of last month pushed up monthly payments for prospective homebuyers. The national median payment on home loan applications in February was $2,184, an increase of 6% from a year earlier, the Mortgage Bankers Association said Thursday.
The MBA forecasts that mortgage rates will gradually ease to around 6% by the end of the year.
The U.S. housing market is coming off a deep, 2-year sales slump triggered by a sharp rise in mortgage rates and a dearth of homes on the market. The overall pullback in mortgage rates since their peak last fall has helped provide more financial breathing room for homebuyers.
Sales of previously occupied U.S. homes rose in February from the previous month to the strongest pace in a year. That followed a month-to-month home sales increase in January.
Still, the average rate on a 30-year mortgage remains well above where it was just two years ago at 4.67%. That large gap between rates now and then has helped limit the number of previously occupied homes on the market by discouraging homeowners who locked in rock-bottom rates from selling.
“With rates still hovering around 7%, many prospective homebuyers are taking a ‘wait-and-see’ approach until affordability improves and more listings hit the market,” said Bob Broeksmit, CEO of the Mortgage Bankers Association.
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