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June 27 (Reuters) - Interest rates on U.S. 30-year fixed-rate mortgages declined to their lowest levels since November 2016 as U.S. bond yields have fallen on expectations the Federal Reserve may lower interest rates as early as July, Freddie Mac said on Thursday.
A further decline in home borrowing costs should support the housing sector as other parts of the U.S. economy seem to be softening partly due to global trade tensions.
“While the industrial and trade related economic data continues to dominate the news, the drop in mortgage rates over the last two months is already being felt in the housing market," Freddie Mac's chief economist Sam Khater said in a statement.
"In the near-term, we expect the housing market to continue to improve from both a sales and price perspective,” he added.
Earlier Thursday, the National Association of Realtors said its index on U.S. pending home sales, which is a proxy on future housing activity, rose 1.1% to a reading of 105.4 in May.
Thirty-year mortgage rates averaged 3.73% in the week ended June 27, down from 3.84% a week earlier and lower than 4.55% a year ago, the mortgage finance agency said.
A week ago, benchmark 10-year Treasury yields fell to 1.974%, which was the lowest level since November 2016. They have been trading on either side of 2% since then.
Last Wednesday, the U.S. central bank signaled it was ready to lower interest rates to counter risks from global trade tensions and sluggish domestic inflation.
Interest rates futures implied traders fully expect the Fed would cut borrowing costs by at least a quarter point to 2.00%-2.25% at the end of July.
Fifteen-year mortgage rates averaged 3.16% in the latest week, the lowest since October 2017. They were down from 3.25% a week earlier and 4.04% a year ago.
The average interest rate on five-year adjustable-rate mortgages fell to 3.39%, the lowest since December 2017. They were lower than 3.48% the week before and 3.87% a year earlier.
Reporting by Richard Leong Editing by Chizu Nomiyama