A Slight Drop in US Long-Term Mortgage Rates
The average 30-year mortgage rate in the US has seen a slight decrease this week, keeping within the similar narrow range that has been observed over the past couple of months.
The long-term mortgage rate dropped from 6.21% to 6.18%, a subtle but noteworthy change. A similar trend was observed a year ago when the rate was at an average of 6.85%.
Interest Rates for 15-Year Mortgage Loans Rise
On the other hand, 15-year fixed-rate mortgages, which are frequently chosen by homeowners refinancing their home loans, experienced a minor increase this week. The rate rose from 5.47% to 5.50%, which is still lower than the average of 6% recorded one year prior.
Factors Influencing Mortgage Rates
Mortgage rates are affected by a variety of elements, ranging from the Federal Reserve’s interest rate policy decisions to bond market investors’ economic and inflation expectations. Mortgage rates typically follow the path of the 10-year Treasury yield, which is used by lenders as a benchmark for pricing home loans.
The 10-year Treasury yield stood at 4.15%, a slight increase from the previous week's 4.12%.
Stability in 30-Year Mortgage Rates
Over the recent weeks, the average 30-year mortgage rate has remained relatively stable. The rate reached its lowest point in over a year on October 30, dipping to 6.17%.
Since July, mortgage rates have been gradually easing in anticipation of a series of Federal Reserve rate cuts, which commenced in September and continued into the following month.
While the Federal Reserve doesn't directly set mortgage rates, its decisions, such as cutting its short-term rate, can suggest potential lower inflation or slower economic growth, prompting investors to purchase US government bonds. This activity can lower the yields on long-term US Treasurys and may result in reduced mortgage rates. However, it's important to note that Federal Reserve rate cuts don't always equate to lower mortgage rates.
Current Mortgage Rates Benefit Home Buyers
Those in the market for a new home who can pay cash or finance at the current mortgage rates are at an advantage compared to last year. More homes are listed for sale than a year ago, and numerous sellers have had to decrease their initial asking prices as homes are taking longer to sell.
Nevertheless, affordability continues to be a hurdle for many prospective homeowners, particularly first-time buyers who lack equity from a previous home to invest in a new one. Economic and job market uncertainties are also discouraging potential buyers.
House Sales Trends
Despite the average long-term mortgage rates remaining near their low point for the year, sales of previously owned US homes increased in November from the previous month but slowed down compared to the same period last year. This is the first time this has happened since May. Home sales for the first 11 months of the year have decreased by 0.5% compared to the same period last year.
Looking forward, economists predict that the average rate on a 30-year mortgage will hover slightly above 6% next year.