Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Boost for homebuyers: Average long-term mortgage rate falls to 6.6%, lowest level since May

The average long-term U.S. mortgage rate fell this week to its lowest level since May, welcome news for prospective homebuyers facing rising home prices and intense competition for relatively few properties on the market

Alex Veiga
Thursday 18 January 2024 17:14 GMT
Mortgage Rates
Mortgage Rates (Copyright 2024 The Associated Press. All rights reserved.)

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

The average long-term U.S. mortgage rate fell this week to its lowest level since May, welcome news for prospective homebuyers facing rising home prices and intense competition for relatively few properties on the market.

The average rate on a 30-year mortgage dropped to 6.6% from 6.66% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.15%.

The decline, which follows two weeks of increases, brings the average rate down to the lowest level it's been in since late May, when it was 6.57%.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also eased this week, dropping the average rate to 5.76% from 5.87% last week. A year ago, it averaged 5.28%, Freddie Mac said.

“This is an encouraging development for the housing market and in particular first-time homebuyers who are sensitive to changes in housing affordability," said Sam Khater, Freddie Mac’s chief economist. "However, as purchase demand continues to thaw, it will put more pressure on already depleted inventory for sale.”

Home loan borrowing costs have been mostly coming down since late October, after the average rate on a 30-year mortgage surged to 7.79%, the highest level since late 2000.

The average rate remains sharply higher than just two years ago, when it was 3.56%. 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.

Still, the broad decline in rates since last fall is good news for homebuyers, as it boosts their purchasing power at a time when home prices have kept climbing rising despite a deep housing market slump. Sales of previously occupied U.S. homes sank more than 19% through the first 11 months of last year.

The decline in mortgage rates has followed a pullback in the 10-year Treasury yield, which lenders use as a guide to pricing loans. The yield, which in mid October surged to its highest level since 2007, has come down on hopes that inflation has cooled enough for the Federal Reserve to shift to cutting interest rates this year.

The central bank has indicated it will likely cut rates several times in 2024 because inflation has been cooling since its peak two summers ago. Uncertainty remains, however, on how many cuts the Fed may deliver this year and how soon it would begin.

If rates continue to ease, as many economists expect, that should help boost demand heading into the spring homebuying season, which traditionally begins in late February.

Still, at this point, economists generally predict the average rate on a 30-year mortgage going no lower than 6%.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in