US mortgage rates fell for the second week in a row, but they remain above 7%. The average mortgage rate dropped to 7.24% this week through Wednesday, down from 7.32% a week earlier, according to Freddie Mac data.
The 30-year fixed mortgage rate remains above 7%, making home loans expensive for buyers. US Treasury yields remained close to 5% this week. Mortgage rates closely follow the 10-year US Treasury yield , which stayed near 5%, although it was slightly lower than it had been a few weeks earlier, according to Yahoo Finance. Mortgage refinancing applications have fallen by more than 60%.
Because of high monthly mortgage payments, although borrowing costs have fallen slightly, many people still find it difficult to afford a home. As a result, bond yields and mortgage rates saw little movement after the announcement. The decision was widely expected by investors. Refinancing allows homeowners to replace an existing home loan with a new one, often to get a different interest rate or change their loan terms.
The sharp drop shows that high borrowing costs continue to limit refinancing activity, according to the MBA. The Federal Reserve kept its benchmark interest rate unchanged on Wednesday.
What affects US mortgage rates?
A borrower’s credit score and debt can affect the interest rate offered by a lender. People who improve their credit scores, reduce their debt or save more money for a down payment may qualify for better mortgage rates. However, the final rate also depends on the lender and wider market conditions. The state of the economy can also affect mortgage rates. When economic activity and employment weaken, interest rates may fall as policymakers try to encourage borrowing and spending . When the economy is strong, interest rates may rise to help control spending and inflation. The interest rate remains unchanged throughout the loan term, making monthly payments more predictable.
A 30-year fixed mortgage offers lower monthly payments but can cost more over time. However, borrowers pay interest over 30 years, which can increase the total cost of the loan.
