Mortgage Costs Drop to 7.24% as Treasury Yields Settle

The average rate on a 30-year fixed mortgage fell to 7.24% this week, marking the second straight week of declines. Freddie Mac reported the drop on Thursday, noting the rate is the lowest it has been in over a month. The figure comes down from 7.32% recorded in the previous week.

Short-term borrowing costs also eased. The average rate for 15-year fixed mortgages, a product commonly used by homeowners seeking to refinance, slipped to 6.60% from 6.68% last week. A year ago, the 15-year average stood at 5.41%, while the 30-year rate was 6.17%.

The shift in rates follows a period of volatility linked to geopolitical events. Mortgage rates began rising in late February when the United States entered a war with Iran. The conflict increased oil prices and pushed inflation higher. Bond market investors reacted by demanding higher yields, which drove up the cost of borrowing for homes.

The 10-year Treasury yield serves as a primary guide for lenders pricing home loans. That yield reached its highest level since 2002 earlier this month, surging past 5.30%. It has since eased to 4.98% as of midday Thursday. This yield remains well above the 3.97% level seen before the war began.

The earlier spike in yields pushed the average 30-year mortgage rate to 7.4% earlier this month, a high not seen in nearly three years. Since then, the modest easing in Treasury yields has allowed the mortgage average to tick down. This decline provides some relief to prospective buyers who have faced rising monthly payments.

The cost of borrowing has had a measurable impact on the housing market. Since late February, when the 30-year rate briefly touched 5.98%, the increase in rates has added roughly $350 to the monthly payment for a borrower financing a $400,000 loan. This added cost has limited purchasing power and contributed to stalled home sales.

The U.S. housing market has remained in a slump since 2022, when rates started climbing from pandemic-era lows. Sales of previously occupied homes were essentially flat last year, stuck at a 30-year low. Individual borrowers may see rates above or below the current average depending on their income and credit profiles.