The average 30-year mortgage rate in the US was close to 6% this week, the lowest level since early February 2023.
The rate eased to 6.09% from 6.20% last week, mortgage broker Freddie Mac said Thursday. Last year, the rate was 7.19%.
The last time the average rating was this low was February 2, 2023.
Borrowing costs on 15-year mortgages, favored by homeowners looking to refinance their mortgages at a lower rate, were also lowered this week. The average rate fell to 5.15% from 5.27% last week. Last year, it averaged 6.54%, Freddie Mac said.
Mortgage rates are influenced by several factors, including how the bond market reacts to the Fed’s interest rate policy decisions. That could shift the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing mortgage loans.
Rates have been falling sharply since July as signs of inflation and a cooling job market raised expectations of Fed tapering, pushing the 10-year yield low.
That rate cut came on Wednesday, as the Federal Reserve cut interest rates for the first time in more than four years. Fed officials have also signaled that they expect more tapering this year and in 2025 and 2026. Lower rates should, over time, lead to lower borrowing costs.
The recent decline in rates should help spur demand for refinancing and home equity loans, said Sam Khater, Freddie Mac’s chief economist.
“Although mortgage rates do not directly follow the Federal Reserve’s moves, this first rate cut in four years will have an impact on the housing market,” Khater said. “The drop in mortgage rates over the past few weeks indicates that these cuts were on target, but we expect rates to drop significantly, resulting in a housing boom.”
After climbing to a 23-year high of 7.79% in October, the average 30-year mortgage has hovered around 7% for most of this year — more than double what it was three years ago.
High mortgage rates, which can add hundreds of dollars a month to borrowers’ costs, have put off many homebuyers, extending the nation’s housing slump into its third year. US pre-owned home sales fell in August as home prices began to ease.
However, with rates falling, many homeowners are applying for refinances to refinance their mortgages. Refinance loan applications rose 24% last week, according to the Mortgage Bankers Association.
Economists generally expect mortgage rates to stay close to current levels, at least this year. Fannie Mae said this week that it expects the 30-year mortgage rate to be 6.2% in the October-December quarter and fall to 5.7% in the same quarter next year. It reached 7.3% during the same period in 2023.
-Alex Veiga, Associated Press business writer
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