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Higher mortgage rates can add hundreds of dollars a month in
costs for borrowers, limiting homebuyers’ purchasing power. And
that can led prospective home shoppers to delay buying, as seen
while rates rose over prior weeks. U.S. sales of
previously-occupied homes again slowed in July.
Borrowing costs on 15-year fixed-rate mortgages — which are
often sought by borrowers looking to refinance a home loan —
also fell slightly this week. That rate averaged at 5.96%, down
from 6.01% last week. But that's still higher than a year ago,
when Freddie Mac said 15-year fixed-rate mortgages averaged at
5.71%.
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.
Similar to the latest mortgage rates, the 10-year Treasury has
also eased a bit recently. The 10-year Treasury fell to 4.61% as
of midday trading Thursday — down from 4.72% at the start of the
week.
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.
Before the war, the 10-year Treasury was just 3.97%. And 30-year
and 15-year mortgage rates sat around 5.98% and 5.44%,
respectively, in late February per Freddie Mac.
Meanwhile, consumer and wholesale inflation also cooled some in
the U.S. last month. Prices to continue to climb, just at a
slower pace. If that trend continues, the Federal Reserve could
decide to hold off on hikes to interest rates.
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