Average long-term US mortgage rate eases to 6.3%, back to its lowest level in about a year

Key Points

• The average long-term US mortgage rate has fallen to 6.3%, the lowest level in about a year, down from 6.34% last week.
• Borrowing costs for 15-year fixed-rate mortgages also decreased, with a current average of 5.53%, slightly above the 5.41% reported a year ago.
• The decline in mortgage rates is influenced by factors such as the Federal Reserve’s interest rate policies and economic expectations, with the 10-year Treasury yield recently up to 4.13%.
• Despite the Fed's recent rate cut, future mortgage rate trends remain uncertain, as past cuts have sometimes led to increases in mortgage rates.

The average rate on a 30-year U.S. mortgage edged lower this week, returning to its lowest level in about a year.

The average long-term mortgage rate slipped to 6.3% from 6.34% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.32%.

The modest drop brings the average rate back to where it was two weeks ago, after a string of declines brought down home loan borrowing costs to their lowest level since early October 2024.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also eased this week. The average rate dropped to 5.53% from 5.55% last week. A year ago, it was 5.41%, Freddie Mac said.

“Despite the decline, rates continue to hover within a narrow band they’ve maintained since mid-September, as markets remain in a holding pattern amid fiscal and monetary uncertainty, including the ongoing government shutdown,” said Anthony Smith, senior economist at Realtor.com.

Mortgage rates are influenced by several factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations for the economy and inflation. They generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.

The 10-year yield was at 4.13% at midday Thursday, up from around 4.09% the same time last week. The yield has been trending higher since it slid to around 4.02% on Sept. 11.

In late July, mortgage rates started declining in the lead-up to the Federal Reserve’s widely anticipated decision last month to cut its main interest rate for the first time in a year amid growing concern over the U.S. job market.

However, Fed Chair Jerome Powell has since signaled a cautious approach to future interest rate cuts. That’s in sharp contrast with other members of the Fed’s rate-setting committee, particularly those who were appointed by President Donald Trump, who are pushing for faster cuts.

Even if the Fed opts to cut its short-term rate further that doesn’t necessarily mean mortgage rates will keep declining. Last fall, after the Fed cut its rate for the first time in more than four years, mortgage rates marched higher, eventually reaching just above 7% in January this year.

The average rate on a 30-year mortgage has stayed above 6% since September 2022, the year mortgage rates began climbing from historic lows. The housing market has been in a slump ever since.

Sales of previously occupied U.S. homes sank last year to their lowest level in nearly 30 years. So far this year, sales are running below where they were at this time in 2024.

Still, the recent decline in mortgage rates could set the stage for a modest lift in sales in coming weeks, going by recent data on contract signings.

The National Association of Realtors’ seasonally adjusted index of pending U.S. home sales rose 4% in August from the previous month and 3.8% from the same month last year. There’s usually a month or two lag between a contract signing and when the sale is finalized, which makes pending home sales a bellwether for future completed home sales.

Meanwhile, many homeowners who bought in recent years after rates climbed well above 6% have moved to refinance their existing loan to a lower rate.

Mortgage applications, which include loans to buy a home or refinance an existing mortgage, fell 4.7% last week from a week earlier, according to the Mortgage Bankers Association. But applications for mortgage refinance loans made up 53.3% of all applications.

More prospective homebuyers are also applying for an adjustable-rate mortgage. Such loans, which typically offer lower initial interest rates than traditional 30-year, fixed-rate mortgages, accounted for 9.5% of all mortgage applications last week.

Mortgage rates will have to drop below 6% to make refinancing an attractive option to a broader swath of homeowners, however. That’s because about 80% of U.S. homes with a mortgage have a rate below 6% and 53% have a rate below 4%, according to Realtor.com.

Economists generally forecast the average rate on a 30-year mortgage to remain near the mid-6% range this year.