The average interest rate for a 30-year fixed-rate mortgage in the U.S. has decreased for the second week in a row, reaching 6.65%, down from 6.67% the previous week. However, this figure remains higher than the 6.58% recorded at this time last year. Similarly, rates for 15-year fixed-rate mortgages, a common choice for homeowners refinancing their loans, also saw a slight reduction to 5.95% from 5.96% week-over-week. This rate is also elevated compared to the 5.69% recorded a year ago.
Despite the recent downward trend, mortgage rates have largely been on an upward trajectory throughout the current year, contributing to reduced purchasing power for potential homebuyers. These elevated borrowing costs often prompt prospective buyers to postpone home purchases, a significant factor behind the sluggish pace of U.S. home sales this year.
Several elements influence mortgage rates, including inflation data, decisions by the Federal Reserve on broader policy rates, and investor sentiment in the bond market. Mortgage rates typically mirror the movement of the 10-year Treasury yield, which lenders use as a benchmark for pricing home loans.
Both mortgage rates and the bond market have experienced an overall increase this year, partly influenced by global events such as the conflict involving Iran, which has fueled expectations of rising inflation due to surges in crude oil prices. Although oil prices have recently eased, long-term bond yields have not fully receded to pre-conflict levels, keeping mortgage rates at higher levels. The 10-year Treasury yield stood at 4.71% as of Thursday midday, a notable increase from 3.97% in late February before the conflict began.
In response to rising bond yields, driven by concerns over inflation and substantial government debt, the U.S. Treasury Department announced on Wednesday its intention to at least double the amount of U.S. government bonds it plans to repurchase in the coming months. This announcement helped to lower yields, which had reached a more than one-year high for the 10-year Treasury.
The U.S. housing market has been experiencing a downturn since 2022, when mortgage rates began to climb from historic lows seen during the pandemic. Sales of previously occupied homes remained stagnant last year, hitting a 30-year low, and further slowed in July.