WASHINGTON (AP) – Average long-term U.S. mortgage rates fell this week and remain at historically low levels, just as the Federal Reserve prepares to raise its main borrowing rate later this month.

The average rate on a 30-year loan declined to 3.76% this week from 3.89% last week, mortgage buyer Freddie Mac reported Thursday. A year ago, the long-term rate was 3.02%.

The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, fell to 3.01% from 3.14% a week earlier. It stood at 2.34% a year ago.

Chair Jerome Powell said Wednesday that he supports a traditional quarter-point increase in the Federal Reserve’s benchmark short-term interest rate when the Fed meets later this month, rather than a larger increase that some of its policymakers have proposed.

But Powell did open the door to a bigger hike in the event that inflation, which has reached a four-decade high, doesn’t noticeably decline this year, as the Fed expects it to.

The Labor Department reported last month that consumer prices were 7.5% in January compared with 12 months earlier, the steepest year-over-year increase since February 1982. Higher costs for nearly everything have wiped out Americans’ pay raises, reinforcing the Federal Reserve’s intention to raise borrowing rates.

Home prices are up about 14% in the past year and as much as 30% in some cities. Housing supply was limited even before the pandemic began in 2020, and higher prices and rising interest rates would make it even harder for Americans to secure a new home.

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