Mortgage Rates Dip Below 7%
Mortgage rates have declined for the first time in six weeks, dropping below 7% as bond traders alleviate concerns over President Trump's economic policies.
According to Freddie Mac data, the average 30-year fixed-rate mortgage rate fell to 6.96% on Wednesday, down from 7.04% a week earlier. The average 15-year rate also decreased, from 6.27% to 6.16%.
"While affordability challenges persist, this news is encouraging for potential homebuyers, as reflected in an increase in purchase applications," said Sam Khater, Freddie Mac's chief economist.
Purchase applications rose 1% last week, while refinancing applications declined 3%, per the Mortgage Bankers Association. MBA chief economist Mike Fratantoni noted that 7% is a "key psychological level" that can slow down both refinancing and purchase activity.
The rate decrease follows President Trump signing executive orders in his first days in office, but postponing the imposition of tariffs on goods from China, Mexico, and Canada. Ten-year Treasury yields, which track mortgage rates closely, fell as financial markets eased concerns that Trump's policies would exacerbate inflation.
However, mortgage rates remain near their highest levels since mid-2024, and tariffs remain a potential factor. Fannie Mae predicts rates will stay elevated, ending the year at 6.5%, up from 6.2%.
Mark Palim, Fannie Mae's chief economist, believes that higher rates will keep home sales near their 30-year low for a third consecutive year. Affordability issues and the "lock-in effect" (where homeowners with low rates choose not to sell) are further limiting market activity.
"The lock-in effect is more persistent than we anticipated," Palim told Yahoo Finance.