Sales of existing homes have fallen for 10 straight months to the lowest level in more than a decade.
WASHINGTON (AP) — After two straight weekly increases, the average long-term U.S. mortgage rate came back down again this week but remains a significant hurdle for many prospective home buyers.
Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate fell to 6.33% from 6.48% last week. A year ago the average rate was 3.45%.
The average long-term rate reached a two-decade high of 7.08% in the fall as the Federal Reserve continued to boost its key lending rate in its quest to cool the economy and tame inflation.
At its final meeting of 2022, the Federal Reserve raised its rate 0.50 percentage points, its seventh increase last year. That pushed the central bank’s key rate to a range of 4.25% to 4.5%, its highest level in 15 years.
Though another report Thursday showed that inflation at the consumer level eased to 6.5% in December — a sixth straight monthly decline — Fed officials have signaled that they may raise the central bank’s main borrowing rate another three-quarters of a point in 2023, which would be in a range of 5% to 5.25%.
The big increase in mortgage rates during the past year has tripped up the housing market, with sales of existing homes falling for 10 straight months to the lowest level in more than a decade.
Though home prices have retreated as demand has declined, they are still nearly 11% higher than a year ago. Higher prices and a doubling of mortgage rates have made home buying much less affordable for many people.
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 Federal Reserve does with interest rates can also influence the cost of borrowing for a home.
The rate for a 15-year mortgage, popular with those refinancing their homes, also fell this week, to 5.52% from 5.73% last week. It was 2.62% one year ago.
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