Mortgage rates fall to lowest level in over a month as Iran deal framework takes shape

Mortgage rates fell this week to the lowest level in more than a month, mortgage buyer Freddie Mac said Thursday.

Freddie Mac's latest Primary Mortgage Market Survey, released Thursday, showed the average rate on the benchmark 30-year fixed mortgage declined to 6.47% from last week's reading of 6.52%. 

The average rate on a 30-year loan was 6.81% a year ago.

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"Incoming data continues to reflect a resilient consumer, with retail sales improving and pending home sales strengthening, suggesting purchase demand is continuing to modestly improve," said Sam Khater, Freddie Mac's chief economist.

The average rate on a 15-year fixed mortgage fell to 5.81% from last week's reading of 5.84%.

Rates have been elevated of late as concerns over the Iran war weighed on markets. On June 17, President Donald Trump signed a memorandum of understanding while attending meetings in France, while Iran signed remotely. The temporary framework calls for an immediate cessation of hostilities, the reopening of the Strait of Hormuz, limits on Iran's enriched uranium stockpile and a 60-day window to negotiate a permanent agreement addressing Tehran's nuclear program.

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The deal also includes provisions to ease economic pressure on Iran, including access to some frozen assets and the lifting of certain restrictions, while drawing criticism from some conservatives who argue the agreement offers too many concessions without requiring Iran to immediately dismantle its nuclear infrastructure.

"The previous weeks have been filled with constant back-and-forths, showing progress toward a resolution, only to be followed by heightened military action," said Realtor.com senior economist Anthony Smith. "However, the latest rounds have proven more promising than previous periods of reprieve, as a tentative deal has now been drafted and now signed by President Trump."

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Mortgage rates are affected by several factors, including the Federal Reserve and geopolitics. Though mortgage rates are not directly affected by the Fed's interest rate decisions, they closely track the 10-year Treasury yield. The 10-year yield hovered around 4.45% as of Friday afternoon.

The U.S. central bank on Wednesday announced that it will hold interest rates steady due to concerns about elevated inflation amid the war in Iran, as new Federal Reserve Chairman Kevin Warsh's tenure leading the central bank begins in earnest.

Fed policymakers voted 12-0 to leave the benchmark federal funds rate unchanged at its current range of 3.5% to 3.75%. The move follows the central bank's decision to hold rates steady in January, March and April following three successive 25-basis-point rate cuts in September, October and December to close out last year.

The Federal Open Market Committee (FOMC), the central bank's panel responsible for monetary policy moves, noted in its statement that inflation remains elevated above the central bank's 2% goal, which it said was "in part reflecting supply shocks that have driven price increases in certain sectors, including energy."

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"Warsh used his first decision as chair to signal a broader regime change: the easing bias is gone, forward guidance has been shelved, and the committee's statement was rewritten around a single, unhedged commitment to delivering price stability," Smith said. "Markets responded with a jump in the 10-year Treasury and rising odds of a rate hike before year's end. The logic of Warsh's approach, earning credibility by following through rather than telegraphing, is sound and ultimately the path to lower long-term rates. But a market without clear guidance may demand a premium in the near term, which could keep mortgage rates from falling as quickly as the Iran ceasefire alone might suggest."

FOX Business' Bradford Betz and Eric Revell contributed to this report