Key Takeaways:
Mortgage rates have held above 6.4% for six straight weeks, keeping the US housing market stuck in its deepest slump since the early 2010s.
The average for a 30-year fixed loan rose to 6.49% from 6.47% a week earlier, Freddie Mac said Thursday. The rate was 6.77% a year ago. The 15-year fixed-rate mortgage, a popular refinancing option, ticked up to 5.84% from 5.81%.
"Rates have remained relatively stable over the last six weeks," said Sam Khater, chief economist at Freddie Mac. "Meanwhile, purchase activity eased modestly and refinance activity has continued to pick up recently, reflecting borrowers' responsiveness to current rate levels."
The 10-year Treasury yield, which lenders use as a benchmark for pricing home loans, stood at 4.38% at midday Thursday, down from 4.46% a week earlier but well above the 3.97% level in late February before the US-Iran conflict disrupted crude oil flows from the Persian Gulf. The war drove oil prices sharply higher, pushing up inflation and bond yields. Oil prices have since eased amid negotiations to end the conflict, though the 10-year yield briefly breached 4.5% earlier this week.
Why rates are stuck above 6.4%
Mortgage rates are being pulled in two directions. On one side, the easing of oil prices and the start of US-Iran negotiations have taken some pressure off bond yields. On the other, the Federal Reserve has signaled it could raise interest rates at least once before year-end, keeping the short end of the curve elevated. The central bank does not set mortgage rates directly, but its policy stance influences the yield on 10-year Treasurys, which has stayed above 4.3% since late February.
The last time the 30-year mortgage rate dipped below 6% was in late February, when it slipped to just under that threshold for the first time since 2022. It has not fallen below 6% since. Four weeks ago, the rate reached 6.53%, its highest level since Aug. 28.
Home sales remain well below historic norms
Sales of previously occupied US homes declined in the first three months of the year compared with a year earlier, extending a slump that began in 2022 when mortgage rates started climbing from pandemic-era lows. Sales were essentially flat in April but accelerated in May to their fastest pace since December. Still, existing home sales continue to hover near a 4 million annualized pace, far short of the historic norm of about 5.2 million.
For borrowers, the difference between a 6% and a 6.5% rate adds roughly $150 a month in interest on a $400,000 loan, reducing purchasing power at a time when home prices remain elevated. The combination of elevated rates and limited inventory has pushed the median age of first-time homebuyers to 40, according to a separate Bloomberg analysis.
The path forward depends largely on the trajectory of inflation and the Fed's response. If the US-Iran conflict continues to de-escalate and oil prices fall further, bond yields could decline, pulling mortgage rates back toward 6%. But if the Fed follows through on its hawkish signal and raises rates, the 30-year mortgage could test its August 2025 high of 6.53% or beyond.
This article is for informational purposes only and does not constitute investment advice.
