The average long-term U.S. mortgage rate inched down this week to its lowest level in six weeks, just as the spring buying season gets underway.
Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate fell for the third straight week, to 6.32%, from 6.42% last week. The average rate a year ago was 4.67%.
The recent decline in mortgage rates is good news for prospective homebuyers, as many were pushed to the sidelines during the past year as the Federal Reserve cranked up its main borrowing rate nine straight times in a bid to bring down stubborn, four-decade-high inflation.
Also helping buyers, home prices appear to be leveling off. The national median home price slipped 0.2% from February last year to $363,000, marking the first annual decline in 13 years, according to the National Association of Realtors.
One thing that hasn't gotten much better is the supply of homes.
"Over the last several weeks, declining rates have brought borrowers back to the market but, as the spring homebuying season gets underway, low inventory remains a key challenge for prospective buyers," said Sam Khater, Freddie Mac's chief economist.
The average long-term mortgage rate hit 7.08% in the fall -- a two-decade high.
Rising borrowing costs can add hundreds of dollars a month in costs for homebuyers and put the brakes on the housing market. Before surging 14.5% in February, sales of existing homes had fallen for 12 straight months to the slowest pace in more than a dozen years.
In 2022, sales of existing U.S. homes fell 17.8% from 2021, the weakest year for home sales since 2014 and the biggest annual decline since the housing crisis began in 2008, the National Association of Realtors reported earlier this year.
In their latest quarterly economic projections, Fed policymakers forecast that they expect to raise that key rate just once more -- from its new level of about 4.9% to 5.1%, the same peak they had projected in December.
While the Fed's rate increases impact borrowing rates across the board for businesses and families, rates on 30-year mortgages typically track moves in the 10-year Treasury yield, which lenders use as a guide to price loans.
Investor expectations for future inflation, global demand for U.S. Treasurys and what the Fed does with interest rates can also influence the cost of borrowing for a home.
The rate for a 15-year mortgage, popular with those refinancing their homes, fell this week to 5.56% from 5.68% last week. It was 3.83% one year ago.