Mortgage rates fall below 6.8% for first time since May

Some good news on the mortgage rate front. Sort of.

Mortgage rates dropped for the fourth consecutive week as geopolitical tensions eased and Treasury yields fell.

The average 30-year fixed mortgage rate was 6.77% through Wednesday, from 6.81% a week earlier, according to Freddie Mac data. The average 15-year mortgage rate was 5.89%, from 5.96% last week.

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The 10-year Treasury yield, which mortgage rates closely follow, moved lower all week as Iran and Israel agreed to a ceasefire and two Federal Reserve officials said they would support cutting interest rates as soon as July.

“Borrowers should find comfort in the stability of mortgage rates, which have only fluctuated within a narrow 15-basis point range since mid-April," Freddie Mac chief economist Sam Khater said in a statement.

The Fed’s cuts don’t directly affect mortgage rates, but they do move in response to expectations about future interest rate decisions. In congressional testimony this week, Fed Chairman Jerome Powell reiterated that the Fed wasn’t in a hurry to cut rates.

Read more: How the Fed rate decision affects mortgage rates

Traders see a 26% chance of a cut in July, according to CME FedWatch, though the majority see rates moving lower by September.

While mortgage rates have been drifting modestly lower in recent weeks, they remain stuck in a narrow band in the high 6% range.

High rates coupled with high prices have kept home buying sluggish so far this year. Housing contract activity improved slightly in May, rising 1.8% from April and 1.1% from last year, according to National Association of Realtors data released Thursday. But new home sales tanked 14% last month for the biggest drop in three years.

Mortgage applications for a new home were little changed through Friday compared to a week earlier, according to the Mortgage Bankers Association. Refinancing applications, meanwhile, rose 3% week over week.

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There are few signs that much will change anytime soon. The Mortgage Bankers Association sees rates ending the year slightly lower, at around 6.7%, while Fannie Mae forecasts a gradual decline to around 6.5%.

Read more: When will mortgage rates drop back down below 6%?

"Slightly lower mortgage rates toward the end of the year could further improve affordability, but significant improvements appear unlikely," Zillow senior economist Orphe Divounguy said in a statement.

Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.

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