The average rate on a 30-year U.S. mortgage fell this week to its lowest level in nearly a year, reflecting a pullback in Treasury yields ahead of an expected interest rate cut from the Federal Reserve next week.
The long-term rate eased to 6.35% from 6.5% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.2%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell. The average rate slipped to 5.5% from 5.6% last week. A year ago, it was 5.27%, Freddie Mac said.
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.
Rates have been mostly declining since late July amid growing expectations that the Fed will cut its benchmark short-term interest rate for the first time this year at the central bank’s meeting of policymakers next week.
A similar pullback in rates happened in the leadup to September last year, when the Fed cut its rate in for the first time since March 2020 in the early days of the pandemic. Back then, the average rate on a 30-year mortgage got down to a 2-year low of 6.08%, but soon after climbed again, reaching above 7% by mid-January.
While the Fed doesn’t set mortgage rates, its actions can influence bond investors’ appetite for long-term U.S. government bonds, like 10-year Treasury notes. Lenders use the yield on 10-year Treasurys as a guide to pricing home loans.
The Fed has kept its main interest rate on hold this year because it’s been more worried about inflation potentially worsening because of President Donald Trump’s tariffs than about the job market.
But in a high-profile speech last month, Federal Reserve Chair Jerome Powell signaled the central bank may cut rates in coming months amid concerns about weaker job gains following a grim July jobs report, which included massive downward revisions for June and May.
On Tuesday, revised jobs data from the government showed the U.S. job market was much weaker last year and this year than earlier data suggested. And the latest weekly snapshot of unemployment benefit claims shows more U.S. workers applied for unemployment benefits last week, an indication that the number of layoffs could be rising.
The housing market has been in a slump since 2022, when mortgage rates began climbing from historic lows. Sales have remained sluggish so far this year as the average rate on a 30-year mortgage has mostly hovered above 6.5%.
The average rate is now at its lowest level since Oct. 10, when it was 6.32%.
