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Average long-term US mortgage rate edges lower for the first time in five weeks

A sale sign stands outside a condominium on the market Wednesday, Feb. 21, 2024, in Denver. On Thursday, March 7, 2024, Freddie Mac reports on this week's average U.S. mortgage rates. (AP Photo/David Zalubowski)

LOS ANGELES (AP) — The average long-term U.S. mortgage rate edged lower for the first time in five weeks, a welcome shift for home shoppers this spring homebuying season.

The average rate on a 30-year mortgage slipped to 6.88% from 6.94% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.73%.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell this week, pulling the average rate down to 6.22% from 6.26% last week. A year ago it averaged 5.95%, Freddie Mac said.

“Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates,” said Sam Khater, Freddie Mac’s chief economist.

Mortgage rates ticked higher for most of February as stronger-than-expected reports on inflation and the economy fueled speculation among bond investors that the Federal Reserve would have to hold off on cutting interest rates longer than expected.

Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Fed does with interest rates can influence rates on home loans.

Federal Reserve Chair Jerome Powell said Wednesday rate cuts are likely to begin this year, but the central bank first needs to see more evidence that inflation is cooling. The Fed’s main interest rate is at its highest level since 2001.

Despite the choppy trajectory in mortgage rates this year, the average rate on a 30-year home loan is still down from the 23-year high of 7.79% it reached in late October.

The decline in rates since their peak last fall has helped lower monthly mortgage payments, providing more financial breathing room for homebuyers facing rising prices and a shortage of homes for sale.

Lower rates helped lift sales of previously occupied U.S. homes by 3.1% in January versus the previous month to the strongest sales pace since August.