(Reuters) -The average interest rate on the most popular U.S. home loan fell last week to its lowest level in two months as Treasury market yields, which act as a benchmark for mortgage rates, continued to move lower on the back of cooling inflation and a softening economy.
The average contract rate on a 30-year fixed-rate mortgage declined by 20 basis points to 7.41% for the week ended Nov. 17, data from the Mortgage Bankers Association (MBA) showed on Wednesday. It has declined 45 basis points over the past two weeks and is now at its lowest level since late September.
The yield on the 10-year Treasury note acts as a benchmark to set home loan costs. Home-purchasing borrowing costs had reached two-decade highs near 8% in October.
A more timely mortgage tracker also saw the average rate on a 30-year fixed-rate mortgage fall to a two-month low. It fell to 7.29% this week from 7.44% the week before, according to a Freddie Mac survey released later on Wednesday.
The third consecutive weekly decline in both gauges comes amid signals that the Federal Reserve is unlikely to raise interest rates further. At the beginning of the month it kept its key overnight policy rate unchanged for a second straight meeting and policymakers have since indicated they would raise interest rates again only if progress in controlling inflation faltered.
The dip in mortgage rates meant more would-be purchasers. The MBA's Market Composite Index, a gauge of mortgage applications for both home purchases and refinancings of existing loans, rose 3.0% from a week earlier to a six-week high.
The MBA's Purchase Composite Index, a measure of all mortgage loan applications for purchase of a single family home, increased 3.9% from the prior week.
Purchase applications, however, remain well below typical levels, indicating would-be buyers are still waiting on the sidelines despite the decline in rates.
Sellers locked into lower mortgage rates also continue to hold their homes, keeping housing inventory tight.