Mortgage Rates Dip Below 7% as Bond Market Eases Concerns
Following six weeks of increases, mortgage rates have declined, falling below 7% as bond traders express reduced apprehension about President Trump's economic policies.
According to Freddie Mac data, the average 30-year fixed-rate mortgage rate dropped to 6.96% as of Wednesday, down from 7.04% the previous week. The average 15-year mortgage rate also decreased, moving from 6.27% to 6.16%.
"While affordability remains a challenge, this news is encouraging for potential homebuyers, as evidenced by the corresponding increase in purchase applications," said Sam Khater, Freddie Mac's chief economist.
Purchase applications rose by 1% week-over-week through Friday, while refinance applications decreased by 3%, according to the Mortgage Bankers Association (MBA). MBA chief economist Mike Fratantoni noted that rates around 7% represent "a key psychological level that likely continues to slow the pace of activity for both refinances and purchases."
The rate decline follows President Trump's signing of several executive orders in his first days of office. However, he has yet to implement significant tariffs on goods imported from China, Mexico, and Canada. Ten-year Treasury yields, which closely track mortgage rates, have fallen as financial markets have become less concerned about the potential inflationary impact of Trump's policies.
Despite the recent rate drop, mortgage rates remain near their highest levels since mid-2024, and tariffs are still a possibility. Fannie Mae's latest forecast projects mortgage rates to remain elevated, ending the year at 6.5%, up from 6.2%.
"These higher rates are likely to keep existing home sales at or near a 30-year low for a third consecutive year," said Mark Palim, senior vice president and chief economist at Fannie Mae. "Buyers continue to face affordability challenges, while many potential sellers are opting to hold on to their current low mortgage rates, known as the 'lock-in effect,' limiting market activity."
"We believe the lock-in effect will persist longer than previously anticipated," Palim told Yahoo Finance.