U.S. 30-Year Mortgage Rate Falls to 6.67%

The U.S. mortgage rates saw a slight decline in mid-August, but the overall borrowing costs remain high. The latest data shows that the average rate for a 30-year fixed mortgage has dropped to 6.67%, a slight decrease from the previous week. However, long-term U.S. Treasury yields remain elevated, continuing to limit the downward potential for mortgage rates.

30-Year Rate Declines Slightly

According to Freddie Mac, for the week ending August 13, the average rate for a 30-year fixed mortgage in the U.S. was 6.67%, down from 6.69% the previous week. The average rate for a 15-year fixed mortgage decreased from 6.01% to 5.96%.

Compared to a year ago, the 30-year and 15-year mortgage rates were 6.58% and 5.71%, respectively, indicating that current levels have not significantly returned to the lows seen earlier this year. More frequent data also shows that mortgage rates are still fluctuating at high levels. Mortgage News Daily reported a 30-year fixed mortgage rate of 6.71% on August 14, an increase of 2 basis points from the previous day, but still close to the recent four-week low.

• Based on a $400,000 loan for 30 years
• Monthly payment at 6.67% is approximately $2,573
• Monthly payment at 5.98% is approximately $2,393

The difference is about $180, not including property taxes, insurance, and other housing costs.

Long-Term U.S. Treasury Yields Remain High

Mortgage rates typically follow changes in the bond market, particularly influenced by long-term U.S. Treasury yields. The U.S. Treasury yield curve shows that on August 14, the yield on the 10-year Treasury was 4.68%, up from 4.63% the previous day. The yields on the 20-year and 30-year Treasuries were both at 5.25%, indicating that pressure on long-term rates has not eased.

The market will next focus on the results of the U.S. 20-year Treasury auction, which is seen as an important indicator of whether investors are willing to continue holding long-term Treasuries. The U.S. Treasury's latest quarterly financing plan indicates that it will issue $42 billion in 20-year Treasuries from July to September, maintaining the current nominal coupon auction size.

Slowing Inflation Has Not Led to Significant Decline in Mortgage Rates

Recent inflation data has shown some cooling. The U.S. Consumer Price Index rose 3.4% year-on-year in July, down from 3.5% in June; core inflation fell to 2.5%. The Producer Price Index remained flat month-on-month in July but still rose 4.7% year-on-year.

The Federal Reserve maintained the benchmark interest rate in the range of 3.5% to 3.75% on July 29, but this does not mean that mortgage rates will fall in tandem. As long as bond investors continue to demand higher long-term yields, mortgage financing costs may remain elevated.

Housing market data also reflects this pressure. For the week ending August 7, mortgage applications increased by 3.6%, while the MBA-reported 30-year contract rate fell to 6.77%. However, July existing home sales, on an annualized basis, dropped to 4.06 million units, down 1.7% from the previous month.

In the short term, whether mortgage rates can continue to decline still depends on whether long-term U.S. Treasury yields decrease. If the yield on the 10-year Treasury continues to fall, mortgage rates may have more room to decline.

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