Long-term mortgage rates retreat for second straight week, US average at 7.02%

Townhouses under construction are shown in Cranberry Township, Pa., on March 29, 2024. On Thursday, May 16, 2024, Freddie Mac reports on this week's average U.S. mortgage rates. (AP Photo/Gene J. Puskar, File)

The average rate on a 30-year mortgage in the U.S. fell for the second straight week, giving some relief to home shoppers already facing sky-high prices and a shortage of supply.

The average 30-year rate fell to 7.02% from 7.09% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.39%.

The recent pullbacks followed a five-week string of increases that pushed the average rate to its highest level since November 30. Higher mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting homebuyers' purchasing options.

“The decrease in rates, albeit small, may provide a bit more wiggle room in the budgets of prospective homebuyers,” said Sam Khater, Freddie Mac’s chief economist.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also declined this week, trimming the average rate to 6.28% from 6.38% last week. A year ago, it averaged 5.75%, Freddie Mac said.

Mortgage rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy and the moves in the 10-year Treasury yield, which lenders use as a guide to pricing home loans.

Treasury yields have largely been easing since Federal Reserve Chair Jerome Powell said earlier this month that the central bank remains closer to cutting its main interest rate than hiking it.

Still, the Fed has maintained it doesn’t plan to cut interest rates until it has greater confidence that price increases are slowing sustainably to its 2% target.

Until then, mortgage rates are unlikely to ease significantly, economists say.

After climbing to a 23-year high of 7.79% in October, the average rate on a 30-year mortgage stayed below 7% this year until last month.

Last month's rise in rates were an unwelcome development for prospective homebuyers in the midst of what’s traditionally the busiest time of the year for home sales. On average, more than one-third of all homes sold in a given year are purchased between March and June.

Sales of previously occupied U.S. homes fell in March as homebuyers contended with elevated mortgage rates and rising prices.