rewrite this title Weekly Mortgage Rates Drop, Giving Home Buyers a Boost – NerdWallet

Mortgage rates fell to a three-week low, and with positive trends in home prices and inventory, the market is gradually moving in favor of buyers.

The average rate on a 30-year fixed-rate mortgage dropped 13 basis points to 6.87% in the week ending May 1, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.

Last week, the average mortgage rate on a 30-year loan was 7% and this week it was 6.87%. The lower rate means buyers can borrow more with the same monthly payment — and potentially afford a more expensive home. For example, a home buyer with a budget of $2,600 a month for principal and interest could afford to borrow $5,200 more at this week’s lower rate ($396,000 at 6.87% vs. $390,800 at 7%).

The news on home prices is encouraging. Prices are still rising in most places, but more slowly than a year ago.

Nationwide, home prices rose 3% in the 12 months ending in March, according to Freddie Mac’s monthly house price index. That’s a sharp slowdown compared to the same period 12 months earlier, when prices rose 6.95%.

Price increases are slowing because 31.6% more houses are on the market compared to a year ago, according to data from Realtor.com. The added inventory gives buyers more options, improving housing market conditions.

There’s no easy explanation for this week’s rate decrease.

Rates were already falling by Wednesday before the Bureau of Economic Analysis said total economic output had shrunk slightly in the first quarter— mostly due to a surge in imports ahead of higher tariffs. Because of the timing, you can’t attribute the decline in rates to that report on gross domestic product.

Members of the Federal Reserve can move the mortgage market with just a few words — and that may have happened on April 24, when the president of the Federal Reserve Bank of Cleveland, Beth Hammack, appeared on CNBC’s Squawk Box.

Hammack hinted that a Fed rate cut is possible as early as June if inflation subsides. “If we have clear and convincing evidence by June, July, September…” she said, before being interrupted.

In the days after the interview, the market’s odds of a June rate cut increased, according to CME FedWatch. That sentiment could have added downward pressure on mortgage rates.