The average rate for a 30-year U.S. mortgage has fallen this week to its lowest level in more than a year, showing a positive trend that is boosting U.S. home sales which have faced challenges in recent times. According to Freddie Mac, the average long-term mortgage rate dropped to 6.19%, down from 6.27% the previous week, and significantly lower than the 6.54% average from a year ago. This marks the third consecutive week of decline, reaching its lowest point since October 3, 2024, when it stood at 6.12%.
Additionally, the rate for 15-year fixed-rate mortgages, often sought by homeowners looking to refinance, also experienced a decrease. It fell to 5.44% from 5.52% last week, contrasting with the 5.71% rate recorded a year ago.
Mortgage rates are impacted by a variety of factors, including the Federal Reserve’s policy decisions and the economic expectations of bond market investors. These rates typically align with the movements of the 10-year Treasury yield, which serves as a benchmark for lenders when setting home loan prices.
Since September 2022, the average rate for a 30-year mortgage has remained above 6%, coinciding with a downturn in the housing market. Last year saw the lowest sales of previously occupied homes in nearly three decades, and while sales have remained sluggish this year, a notable acceleration in activity was observed last month as mortgage rates began to ease.
The decline in mortgage rates since July can be linked to the Federal Reserve’s decision to lower its main interest rate for the first time in a year, largely due to concerns regarding the job market. At the Fed’s September meeting, projections indicated the possibility of two more rate cuts this year and one in 2026, leading to expectations that contributed to a decrease in the 10-year Treasury yield, which stood at 3.99% midday Thursday.
Nonetheless, the Fed’s approach could shift if inflation rates increase, especially in light of rising tariffs and ongoing trade tensions with China. Jake Krimmel, a senior economist at Realtor.com, commented that while the anticipated rate cut is already factored into the market, uncertainties regarding a potential December move and persistent inflation expectations may impose limits on how low mortgage rates might descend.
It is important to note that even with a Fed rate cut, mortgage rates do not always follow suit, as evidenced by last fall when rates increased despite a Fed reduction. The recent lull in rates has prompted some homeowners, who previously bought at higher rates, to consider refinancing.
While mortgage applications saw a slight dip of 0.3% last week, refinancing applications constituted nearly 56% of total applications, reflecting a recent uptick. Moreover, there is an increasing interest in adjustable-rate mortgages, which typically feature lower initial rates compared to traditional fixed-rate options.
For refinancing to become an attractive choice for a broader range of homeowners, mortgage rates will need to drop below 6%. Currently, around 80% of homes with a mortgage have rates below this threshold, and more than half are under 4%, signaling potential opportunities for both current homeowners and those looking to enter the housing market. The ongoing evolution of mortgage rates could thus provide a hopeful outlook for many in the real estate landscape.