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Borrowing costs on 15-year fixed-rate mortgages, often sought by
borrowers refinancing a home loan, also eased this week. That
average rate dropped to 5.95% from 5.96% last week. However, a
year ago, it was at 5.69%.
Despite the recent pullback, mortgage rates have been mostly
rising this year, limiting homebuyers’ purchasing power.
Elevated rates can lead prospective home shoppers to delay
buying a home, one reason U.S. home sales have been sluggish
this year.
Mortgage rates are influenced by several factors, including
inflation, broader policy rate decisions from the Federal
Reserve and expectations from bond market investors for the
economy. They generally follow the trajectory of the 10-year
Treasury yield, which lenders use as a guide to pricing home
loans.
Both mortgage rates and the bond market have been mostly rising
this year due to the U.S. war with Iran, which has fueled
expectations for hotter inflation as crude oil prices soared.
Despite easing oil prices recently, long-term bond yields remain
steeper than they were before the conflict began in late
February, pushing mortgage rates to tread higher.
With bond yields marching higher in recent months on worries
about high inflation, gargantuan government debts and other
factors, the U.S. Treasury Department said Wednesday that it
would at least double the amount of U.S. government bonds that
it planned to buy back over the next few months.
The move helped helped pull yields down after the 10-year
Treasury’s yield had hit its highest level in more than a year.
The 10-year Treasury yield was 4.71% as of midday Thursday on
the bond market. Before the war, it was just 3.97% in late
February.
The U.S. housing market has been in a slump since 2022, when
mortgage rates began to climb from pandemic-era lows. Sales of
previously occupied U.S. homes were essentially flat last year,
stuck at a 30-year low. U.S. sales of previously-occupied homes
again slowed in July.
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