The average long-term U.S. mortgage rate edged lower this week, registering its first drop after two consecutive weeks of increases. The benchmark 30-year fixed rate mortgage rate decreased to 6.36% from 6.37% last week, as reported by mortgage buyer Freddie Mac.
This slight easing brings the current rate below the 6.81% average recorded one year ago. Borrowing costs for 15-year fixed-rate mortgages, often favored by homeowners for refinancing, also saw a modest decline. The average rate for these loans fell to 5.71% this week, down from 5.72% last week. A year ago, the 15-year rate stood at 5.92%, according to Freddie Mac data.
Mortgage rates are influenced by a confluence of factors, including the Federal Reserve’s interest rate policy decisions and bond market investors’ expectations regarding the broader economy and inflation. As recently as late February, the average rate on a 30-year mortgage had briefly dipped just under 6% for the first time since late 2022, though it has not fallen below that threshold since.
Despite the current week’s minor decline, mortgage rates have largely been trending higher since the onset of the war with Iran. The conflict’s impact, particularly the closure of the Strait of Hormuz, has significantly disrupted energy markets. This disruption has led to a sharp increase in crude oil prices, which is a key driver of inflation.
Expectations of sustained higher oil prices have, in turn, pushed up the yield on the U.S. 10-year Treasury note. Lenders commonly use this yield as a primary guide for pricing home loans. The 10-year Treasury yield was observed at 4.44% in midday trading Thursday on the bond market, a notable increase from its 3.97% level in late February, prior to the outbreak of the war.
While current rates remain below last year’s figures, the underlying pressures from geopolitical events and their inflationary consequences continue to shape the mortgage market’s trajectory, making this week’s slight dip a nuanced development.
