# Mortgage rates drop to lowest level since mid-February, but economists warn higher rates could come soon

The 15-year fixed-rate mortgage also fell one basis point from a week ago, dropping to an average of 2.3%. The 5-year Treasury-indexed adjustable-rate mortgage averaged 2.7%, up six basis points from the previous week.

“With few surprising economic data or pandemic-related developments this week, mortgage rates and the bond yields that tend to influence them saw little reason to move significantly over the past seven days,” said Matthew Speakman, an economist with Zillow
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Mortgage rates historically follow the path of long-term bond yields including the yield on the 10-year Treasury note
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1.569%,
though that relationship has at times weakened throughout the COVID-19 pandemic.

The stability in rates over the past week comes in spite of the fact that Treasury Secretary Janet Yellen suggested this week that interest rates may need to increase to prevent the U.S. economy from overheating. Speakman warned though that Thursday’s low rates could be fleeting.

“This period of relative calm will be put to the test in the coming days,” Speakman said. “April employment figures and inflation data, two key gauges of the economy’s path forward, are due this week, and stronger-than-expected readings of either — or both — reports will likely revert mortgage rates back upward.”

Home buyers stand to benefit from this decline in interest rates, even if it is just temporary. Favorable financing continues to motivate buyers, said Realtor.com senior economist George Ratiu.

On top of that, new data from Realtor.com indicates that more sellers are entering the market, especially in states that are loosening their COVID-19 restrictions, providing some relief for buyers who were facing stiff competition amid a record-low supply of homes for sale. New listings for the week ending May 1 were up 18% from a year ago.

“For first-time home buyers, rising inventory and low interest rates open the window of opportunity wider as we move through May, hinting that we might see price gains begin to moderate,” Raitu said.