Mortgage Rates Drop to 7.18% as Treasury Yields Ease

Prospective homebuyers in the United States face lower borrowing costs this week as the average 30-year fixed-rate mortgage declined to 7.18%, according to data released Thursday by mortgage buyer Freddie Mac. The drop follows two consecutive weeks of decreases and offers a partial offset to the rising price of homes. The average rate for 15-year fixed loans also fell, moving to 6.57% from 6.60% the previous week.

Freddie Mac reports that the 30-year rate stands at 7.18% compared to 7.24% last week. A year ago, the average rate for the same loan term was 6.22%. The 15-year rate, which is frequently used by homeowners refinancing existing debt, is currently 6.57%, down from 5.50% at this time last year.

Rising mortgage rates had been a primary factor in stalling U.S. home sales since late February. During that period, the average 30-year rate briefly touched 5.98%, the lowest point since late 2022. As rates climbed, the monthly cost for a borrower financing a $400,000 home loan increased by roughly $300 to $350. These higher costs have limited purchasing power and led many buyers to delay purchases.

The recent decline in mortgage rates aligns with a broader easing in bond market yields. The 10-year Treasury yield, which lenders use as a benchmark for pricing home loans, has softened over the past month. It hit 4.84% at midday Thursday, the lowest level since early September. In early October, the yield had surged past 5.30%, marking its highest level since 2002.

Before the U.S. conflict with Iran began in late February, the 10-year Treasury yield stood at 3.97%. The war drove oil prices and inflation higher, which in turn pushed mortgage rates up. By early October, the average 30-year mortgage rate reached 7.4%, its highest level in nearly three years. Since then, easing volatility in the bond market has allowed rates to retreat.

Freddie Mac notes that individual rates vary based on a borrower's income, credit history, and other factors. Some buyers may qualify for rates below the national average, while others may face rates above it. The U.S. housing market has remained in a slump since 2022, when rates began climbing from pandemic-era lows. Sales of previously occupied homes were flat last year, remaining at a 30-year low.