Introduction to Mortgage Rates
The average rate on a 30-year U.S. mortgage fell again this week, echoing a decline in long-term U.S. Treasury bond yields ahead of the Federal Reserve’s first rate cut this year.
By ALEX VEIGA, AP Business Writer
Current Mortgage Rates
The rate eased to 6.26% from 6.35% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.09%. Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell. The average rate slipped to 5.41% from 5.5% last week. A year ago, it was 5.15%, Freddie Mac said.
Factors Influencing Mortgage Rates
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 generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans. The yield was at 4.12% in midday trading Thursday, up from 4.06% late Wednesday.
Impact of Federal Reserve’s Rate Cut
Mortgage rates have been mostly declining since late July amid expectations that the Fed would cut rates for the first time since last year. As expected, the central bank delivered a quarter-point cut Wednesday and projected it would lower its benchmark rate twice more this year, reflecting growing concern over the U.S. job market. The average rate on a 30-year mortgage is now at its lowest level since Oct. 3, when it was 6.12%.
Effects on the Housing Market
The late-summer slide in mortgage rates has been a welcome trend for the housing market, which has been in a slump since 2022, when mortgage rates began climbing from historic lows. Sales of previously occupied U.S. homes sank last year to their lowest level in nearly 30 years and have remained sluggish so far this year as the average rate on a 30-year mortgage has mostly hovered above 6.5%. “Mortgage rates have eased into the low 6% range, a shift that should support a modest pickup in home sales in the coming months,” said Jiayi Xu, senior economist with Realtor.com. “However, the broader impact will remain limited, as 81% of homeowners still hold mortgages below 6%, reducing incentives to sell or move.”
Refinancing and Mortgage Applications
Still, the pullback in mortgage rates has led to a surge in homeowners who bought in recent years after rates climbed above 6% to refinance now to a lower rate. Mortgage applications, which include loans to buy a home or refinance an existing mortgage, jumped nearly 30% last week from the previous week, according to the Mortgage Bankers Association. Applications for mortgage refinancing loans made up nearly 60% of all applications last week. Demand for adjustable-rate mortgages, or ARMs, is also up sharply. Applications for ARMs accounted for about 13% of all loan applications. That’s the biggest share since 2008, in the aftermath of the 2000s housing bust.
Conclusion
The decrease in mortgage rates is a positive sign for the housing market, which has been experiencing a slump. With the Federal Reserve’s rate cut, mortgage rates are expected to remain low, making it an attractive time for homeowners to refinance or purchase a new home. As the housing market continues to evolve, it’s essential to keep an eye on mortgage rates and their impact on the economy.
FAQs
- Q: What is the current average rate on a 30-year U.S. mortgage?
A: The current average rate on a 30-year U.S. mortgage is 6.26%. - Q: How do Federal Reserve rate cuts affect mortgage rates?
A: Federal Reserve rate cuts can lead to a decrease in mortgage rates, making borrowing more affordable for homeowners and potential buyers. - Q: What is the impact of low mortgage rates on the housing market?
A: Low mortgage rates can lead to an increase in home sales and refinancing activity, as more people take advantage of the lower borrowing costs. - Q: Are adjustable-rate mortgages becoming more popular?
A: Yes, applications for adjustable-rate mortgages are up sharply, accounting for about 13% of all loan applications, the biggest share since 2008.
Originally Published: September 18, 2025 at 12:09 PM EDT
