Image courtesy of Freddie Mac

Home loan borrowing costs eased again this week as the average rate on a 30-year mortgage declined to its lowest level since early April.

The rate fell to 6.87 percent from 6.95 percent last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.67 percent.

This is the third straight weekly decline in the average rate, which has mostly hovered around 7 percent since April. Higher mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting homebuyers’ purchasing options.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also eased this week, lowering the average rate to 6.13 percent from 6.17 percent last week. A year ago, it averaged 6.03 percent, Freddie Mac said.

“Mortgage rates fell for the third straight week following signs of cooling inflation and market expectations of a future Fed rate cut,” said Sam Khater, Freddie Mac’s chief economist.

Home loan rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy and the moves in the 10-year Treasury yield, which lenders use as a guide to pricing home loans.

Yields have mostly eased recently following some economic data showing slower growth, which could help keep a lid on inflationary pressures and convince the Federal Reserve to begin lowering its main interest rate from its highest level in more than 20 years.

Federal Reserve officials said last week that inflation has fallen further toward their target level of 2 percent in recent months and signaled that they expect to cut their benchmark interest rate once this year. The central bank had previously projected as many as three cuts in 2024.

Until the Fed begins lowering its short-term rate, long-term mortgage rates are unlikely to ease significantly, economists say.

Even then, mortgage rates “are likely to remain well above the 3.5 percent to 5 percent range that prevailed in the decade before the pandemic,” said Jiayi Xu, an economist with

The average rate on a 30-year mortgage remains near a two-decade high, discouraging many would-be homebuyers. The elevated rates contributed to a lackluster spring homebuying season. Sales of previously occupied U.S. homes fell in March and April as home shoppers contended with rising borrowing costs and prices.

Another factor constraining the housing market is a tight supply of homes for sale. While it has risen this year, partly because properties are taking longer to sell, the inventory of homes on the market remains well below its pre-pandemic levels. A major factor is many homeowners who bought or refinanced more than two years ago are reluctant to sell now and give up their fixed-rate mortgages below 3 percent or 4 percent – a trend real estate experts refer to as the “lock-in” effect.

As of the end of last year, more than 50 percent of homes with a mortgage had a rate that was 4 percent or lower, and 87 percent had a rate at 6 percent or lower, according to

“While it’s unlikely for mortgage rates to fall below 4 percent, a rate around 6 percent could strongly motivate many sellers to list their homes, thereby increasing overall inventory and exert downward pressure on housing prices,” Xu said.