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US 30-year mortgage rates fall to lowest since Nov 2016

Washington

INTEREST rates on US 30-year fixed-rate mortgages declined to their lowest levels since November 2016 as US bond yields have fallen on expectations that the Federal Reserve may lower interest rates as early as July, Freddie Mac said on Thursday.

A further decline in home borrowing costs should support the housing sector as other parts of the US economy seem to be softening, partly due to global trade tensions.

"While the industrial and trade-related economic data continues to dominate the news, the drop in mortgage rates over the last two months is already being felt in the housing market," Freddie Mac's chief economist Sam Khater said in a statement.

"In the near term, we expect the housing market to continue to improve from both a sales and price perspective," he added. Earlier on Thursday, the National Association of Realtors said that its index on US pending home sales, which is a proxy on future housing activity, rose 1.1 per cent to a reading of 105.4 in May.

Thirty-year mortgage rates averaged 3.73 per cent in the week ended June 27, down from 3.84 per cent a week earlier and lower than 4.55 per cent a year ago, the mortgage finance agency said.

A week ago, benchmark 10-year Treasury yields fell to 1.974 per cent, which was the lowest level since November 2016. They have been trading on either side of 2 per cent since then.

Last Wednesday, the US central bank signalled that it was ready to lower interest rates to counter risks from global trade tensions and sluggish domestic inflation.

Interest rates futures implied that traders fully expect that the Fed would cut borrowing costs by at least a quarter point to 2-2.25 per cent at the end of July.

Fifteen-year mortgage rates averaged 3.16 per cent in the latest week, the lowest since October 2017. They were down from 3.25 per cent a week earlier and 4.04 per cent a year ago.

The average interest rate on five-year adjustable-rate mortgages fell to 3.39 per cent, the lowest since December 2017. REUTERS