Ticker: Mortgage rates drop to 6.77%; US economy shrank 0.5% in the first quarter

The average rate on a 30-year U.S. mortgage fell to its lowest level since early May, an encouraging trend for prospective homebuyers at a time when the U.S. housing market remains largely held back by elevated borrowing costs and rising prices.

The long-term rate fell to 6.77% from 6.81% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.86%.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell. The average rate dropped to 5.89% from 5.96% last week. A year ago, it was 6.16%, Freddie Mac said.

Last year, sales of previously occupied U.S. homes sank to their lowest level in nearly 30 years. They’ve remained sluggish so far this year, as many prospective homebuyers have been discouraged by elevated mortgage rates and home prices that have kept climbing, albeit at a slower pace.

US economy shrank 0.5% in the first quarter

The U.S. economy shrank at a 0.5% annual pace from January through March, the Commerce Department reported Thursday in an unexpected deterioration of earlier estimates.

First-quarter growth was weighed down by a surge of imports as U.S. companies, and households, rushed to buy foreign goods before Trump could impose tariffs on them. The Commerce Department previously estimated that the economy fell 0.2% in the first quarter. Economists had forecast no change in the department’s third and final estimate.

The January-March drop in gross domestic product — the nation’s output of goods and services — reversed a 2.4% increase in the last three months of 2024 and marked the first time in three years that the economy contracted. Imports expanded 37.9%, fastest since 2020, and pushed GDP down by nearly 4.7 percentage points.