The average rate on a 30-year U.S. mortgage fell to its lowest level since early May, an encouraging trend for prospective homebuyers at a time when the U.S. housing market remains largely held back by elevated borrowing costs and rising prices.
The long-term rate fell to 6.77% from 6.81% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.86%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell. The average rate dropped to 5.89% from 5.96% last week. A year ago, it was 6.16%, Freddie Mac said.
High mortgage rates can add hundreds of dollars a month in costs for borrowers and reduce their purchasing power. That's helped keep the U.S. housing market in a sales slump that dates back to 2022, when mortgage rates began to climb from the rock-bottom lows they reached during the pandemic.
Last year, sales of previously occupied U.S. homes sank to their lowest level in nearly 30 years. They've remained sluggish so far this year, as many prospective homebuyers have been discouraged by elevated mortgage rates and home prices that have kept climbing, albeit at a slower pace.
Elevated borrowing costs are also putting pressure on the new-home market. Sales of new U.S. homes fell nearly 14% in May from the previous month, the government reported Wednesday.
''Stuck in a bit of a rut, the housing market continues to suffer from high home prices and elevated mortgage rates,'' said Hannah Jones, senior economic research analyst at Realtor.com. ''However, climbing for-sale inventory in much of the country could help soften upward price pressure and usher in a more friendly housing market for buyers.''
New data suggests sales could pick up in the coming months. A seasonally adjusted index of pending U.S. home sales rose 1.8% in May from the previous month and increased 1.1% from May last year, the National Association of Realtors said Thursday.
