WASHINGTON (AP) — The average long-term U.S. mortgage rate declined for the sixth straight week, giving potential homebuyers a tiny amount of relief after rates topped out over 7% last month.
Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate dipped to 6.27% this week from 6.31% last week. A year ago the average rate was 3.05%.
The average long-term rate reached 7.08% in late October and again in early November as the Federal Reserve has continued to crank up its key lending rate this year in an effort to cool the economy and tame inflation.
Mortgage rates are still more than double what they were a year ago, mirroring a sharp rise in the yield on the 10-year Treasury note. The yield is mostly influenced by global demand for U.S. Treasurys and investor expectations for future inflation, which heighten the prospect of rising interest rates overall.
The Federal Reserve raised its rate again last week by 0.50 percentage points, its seventh increase this year. That pushed the central bank’s key rate to a range of 4.25% to 4.5%, its highest level in 15 years.
More surprisingly, the policymakers forecast that their key short-term rate will reach a range of 5% to 5.25% by the end of 2023. That suggests that the Fed is poised to raise its rate by an additional three-quarters of a point and leave it there through next year.
Despite that, the average U.S. long-term mortgage rate has fallen by more than three-quarters of a point in six weeks.
The Fed has made clear that it thinks sharply higher rates are still needed to fully tame the worst inflation bout to strike the economy in four decades.
The overall sharp rise in mortgage rates this year, combined with still-climbing home prices, have added hundreds of dollars to monthly home loan payments relative to last year, when the average rate on a 30-year mortgage hovered around 3%.
That’s created a significant affordability hurdle for many would-be homebuyers, spurring this year’s housing market downturn. Sales of previously occupied U.S. homes fell for the 10th consecutive month in November, hitting the slowest pre-pandemic annual sales pace in more than 10 years.
The rate for a 15-year mortgage, popular with those refinancing their homes, went the opposite direction this week, rising to 5.69% from 5.54% last week. It was 2.3% one year ago.