LOS ANGELES (AP) — The average long-term U.S. mortgage rate edged higher this week after a two-week drop, a modest move in line with a mostly moderate shift in home-loan rates in recent weeks.
Mortgage buyer Freddie Mac said Thursday that the average rate on the benchmark 30-year home loan rose to 6.39% from 6.35% last week. The average rate a year ago was 5.25%.
The average benchmark rate has moved lower in seven of the last 10 weeks since reaching a high for this year of 6.73% in early March. Still, it remains elevated relative to 2020 and 2021, when the average rate fell below 3%.
High rates can add hundreds of dollars a month in costs for homebuyers, limiting how much buyers can afford at a time when the housing market has slowed, but remains unaffordable to many Americans after years of soaring home prices.
“Higher mortgage rates have slowed home purchase activity during a time in the year when typically home shoppers are out in full force,” said Lisa Sturtevant, chief economist at Bright MLS. “Rate-sensitive homebuyers have either been priced out of the market or are holding off in the hopes that rates will fall.”
Sales of previously occupied U.S. homes fell 23.2% in the 12 months ended in April, marking nine straight months of annual sales declines of 20% or more, according to the National Association of Realtors. The national median home price fell to $388,800 last month — down 1.7% from a year earlier and the biggest year-over-year drop since January 2012, the NAR said Thursday.
Despite the pullback in home prices, a dearth of properties for sale is fueling bidding wars in many markets. One reason for the limited number of homes for sale: Many homeowners who locked in an ultra-low mortgage rate in recent years are reluctant to sell now that rates have since doubled.
Low mortgage rates helped juice the housing market for much of the past decade, easing the way for borrowers to finance ever-higher home prices. That trend began to reverse a little over a year ago, when the Federal Reserve started to hike its key short-term rate in a bid to slow the economy and cool the highest inflation in four decades.
Rates for 30-year mortgages usually track the moves in the 10-year Treasury yield, which lenders use as a guide to pricing loans. Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Fed does with interest rates can also influence rates on home loans.
The Fed has raised its benchmark interest rate 10 times in 14 months. At its meeting of policymakers two weeks ago, the central bank signaled that it could finally pause its yearlong campaign of rate hikes, though a pause would likely only nudge mortgage rates slightly lower.
Yet recent warnings from several Fed officials about the continuing threat from high inflation suggest it’s far from certain that the central bank will forgo another increase in their benchmark rate when they next meet in mid-June.
The average rate on 15-year fixed-rate mortgages, popular with those refinancing their homes, held steady this week at 5.75%. A year ago, it averaged 4.43%, Freddie Mac said.