WASHINGTON — U.S. mortgage rates declined to their lowest level in about seven weeks in early July as easing tensions involving Iran helped calm financial markets, lowering Treasury yields and providing modest relief for prospective homebuyers, according to data released by mortgage finance company Freddie Mac.
The average rate on a 30-year fixed-rate mortgage fell to 6.43% for the week ending July 2, down from 6.49% a week earlier and below the 6.67% recorded during the same period a year ago, Freddie Mac said. The average rate on a 15-year fixed mortgage also edged lower to 5.79% from 5.82%.
The decline follows several months of elevated borrowing costs that intensified after military tensions involving the United States and Iran contributed to higher oil prices and increased inflation concerns, pushing Treasury yields and mortgage rates higher. Recent signs of easing geopolitical tensions have helped reverse part of that move by reducing pressure on energy markets and improving investor sentiment, analysts said.
Freddie Mac Chief Economist Sam Khater said the latest decrease offers some support to the housing market, although financing costs remain well above levels many buyers had hoped for earlier in the year.
Economists cautioned that while the recent decline is welcome, mortgage rates remain sensitive to inflation data, Federal Reserve policy expectations and developments in global energy markets. Mortgage rates typically track movements in the benchmark 10-year U.S. Treasury yield rather than the Federal Reserve's policy rate directly.
Housing affordability continues to weigh on demand despite the modest improvement in borrowing costs. Existing-home sales have remained subdued, with many homeowners reluctant to sell because they continue to hold mortgages carrying substantially lower interest rates secured before the recent period of higher borrowing costs. Elevated home prices have also limited purchasing power for many first-time buyers.
Analysts said further declines in mortgage rates would likely depend on sustained evidence that inflation is moderating and that geopolitical risks remain contained. Any renewed volatility in oil markets or changes in expectations for U.S. monetary policy could quickly alter the outlook for borrowing costs.
For now, the latest Freddie Mac survey indicates borrowing costs have eased modestly from recent highs, offering incremental relief to homebuyers entering the peak summer selling season, even as affordability challenges continue to constrain overall housing market activity.
