The average rate on a 30-year U.S. mortgage has increased to 6.22%, marking the first uptick in five weeks after previously reaching a low not seen in over a year. According to mortgage buyer Freddie Mac, the rate rose from 6.17% last week and is notably down from 6.79% a year prior. This shift follows a period of decline, with the previous week’s average representing the lowest level since October 3, 2024, when it stood at 6.12%.
In conjunction with the increase in 30-year rates, the average rate for 15-year fixed-rate mortgages, commonly favored by those refinancing, also saw a rise, climbing to 5.5% from 5.41%. A year ago, this rate averaged 6%.
Mortgage rates are largely shaped by various factors, including the Federal Reserve’s interest rate policies, the economic outlook, and inflation expectations, which in turn influence the bond market. As lenders typically benchmark home loan pricing against the 10-year Treasury yield, fluctuations in this yield directly impact mortgage rates. As of midday Thursday, the 10-year yield was recorded at 4.09%, down from 4.16% the previous day.
Lower mortgage rates generally enhance homebuyers’ purchasing power and encourage current homeowners to refinance, although rates had remained over 6% since September 2022, coinciding with an overall downturn in the housing market. Last year, sales of previously occupied U.S. homes plummeted to their lowest level in nearly three decades. However, there was a noticeable uptick in sales this September, reaching the fastest pace since February, as mortgage rates dipped.
The recent decline in mortgage rates began in July, leading up to the Federal Reserve’s decision in September to cut its main interest rate for the first time in a year, reflecting rising concerns over the U.S. labor market. Following another cut last week, Fed Chair Jerome Powell cautioned that further rate reductions are not guaranteed, especially if inflation trends upward.
The potential for climbing inflation could lead to increased returns demanded by bond investors, resulting in higher yields on 10-year Treasury notes and subsequently lifting mortgage rates. Notably, a significant number of U.S. homeowners—approximately 80%—are held with mortgage rates below 6%, making refinancing an appealing prospect primarily for those above that threshold.
Ultimately, for many homeowners to find refinancing enticing, mortgage rates would need to dip below 6%, a benchmark that remains crucial given that 53% of mortgages are under 4%. The current state of the mortgage market presents both challenges and opportunities, reflecting broader economic dynamics while showcasing the potential for recovery with lower borrowing costs.