US housing market faces volatility despite decline in mortgage rates

The average long-term US mortgage rate declined for the third consecutive week, offering some relief to prospective homebuyers as the spring housing season continues. According to the Associated Press (AP), the benchmark 30-year fixed mortgage rate fell to 6.23% from 6.3% the previous week, marking its lowest level since mid-March. A year earlier, the rate stood significantly higher at 6.81%.

Shorter-term borrowing costs also moved lower. The average rate on 15-year fixed mortgages, commonly used for refinancing, dropped to 5.58% from 5.65% the previous week. This is also below the 5.94% level recorded a year ago, reflecting a broader easing trend in lending conditions.

AP reported that mortgage rates are influenced by multiple factors, including Federal Reserve policy decisions, inflation expectations, and movements in the bond market. In recent weeks, declining yields on US 10-year Treasury bonds have contributed to the downward trend in mortgage rates. The 10-year yield edged down to around 4.30%, compared with 4.32% a week earlier, although it remains above levels seen earlier in the year.


Market volatility has played a key role in shaping borrowing costs. Earlier in the year, mortgage rates briefly dipped below 6% for the first time since 2022, but geopolitical tensions, particularly the conflict involving Iran, pushed energy prices higher and reignited inflation concerns. According to AP, these developments led to fluctuations in bond yields and mortgage rates, creating uncertainty for both lenders and borrowers.

The broader housing market continues to face challenges. AP noted that the US housing sector has been in a prolonged slump since 2022, when mortgage rates began rising sharply from pandemic-era lows. Sales of previously owned homes remained near a 30-year low last year and have shown continued weakness in the early months of this year, declining compared to the same period a year earlier.

Rising borrowing costs, combined with economic uncertainty and concerns about the labour market, have dampened buyer confidence. Even with recent declines in mortgage rates, affordability remains a key constraint for many households, limiting a strong rebound in housing activity.

Looking ahead, the market outlook remains uncertain. AP indicated that mortgage rates are likely to remain volatile in the near term, driven by ongoing geopolitical risks, energy price movements, and the trajectory of inflation. Sustained improvement in the housing market will likely depend on greater stability in global conditions and clearer signals that inflation is easing on a consistent basis.

If borrowing costs continue to moderate and economic conditions stabilise, the housing market could gradually regain momentum later in the year. However, without sustained declines in rates and improved affordability, any recovery is expected to be gradual rather than immediate.