Introduction to Mortgage Rates
The average rate on a 30-year U.S. mortgage ticked up this week, ending a four-week slide that brought down borrowing costs for homebuyers to the lowest level in nearly a year. The rate rose to 6.3% from 6.26% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.08%.
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. They generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans. The yield was at 4.19% in midday trading Thursday, up from 4.16% late Wednesday.
Impact of Federal Reserve Decisions
Starting in late July, mortgage rates mostly declined in the lead-up to the Federal Reserve’s widely anticipated decision last week to cut its main interest rate for the first time in a year amid growing concern over the U.S. job market. But this week, Fed Chair Jerome Powell signaled a cautious approach to future interest rate cuts, 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.
Effect on Treasury Yields and Mortgage Rates
Treasury yields have since moved higher in the bond market as traders pared bets for the number of upcoming cuts to rates by the Fed. That helped push up mortgage rates. Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also edged higher. The average rate rose to 5.49% from 5.41% last week. A year ago, it was 5.16%, Freddie Mac said.
Current State of the Housing Market
The housing market 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, so far this year, sales are running below where they were at this time in 2024. This week’s rise in rates could signal a repeat of what happened about a year ago after the Fed cut its benchmark rate for the first time in more than four years. Back then, mortgage rates fell for several weeks prior to the when the Fed cut rates at its September 2024 policy meeting. In the weeks that followed, however, mortgage rates began rising again, eventually reaching just above 7% in mid-January.
Refinancing and Home Loan Applications
Still, the late-summer decline in mortgage rates has already encouraged many homeowners who bought in recent years after rates climbed above 6% to refinance to a lower rate. Home loan applications overall rose 0.6% last week from a week earlier as mortgage rates fell, according to the Mortgage Bankers Association. But applications for home refinance loans accounted for more than 60% of all applications, MBA said. “Even with this week’s uptick, mortgage rates remain near 11-month lows, creating opportunities for both buyers and homeowners considering a refinance,” said Hannah Jones, senior economic research analyst at Realtor.com.
Conclusion
Mortgage rates will have to go well below 6% to make refinancing an attractive option to a broader swath of homeowners, however. That’s because about 81% of U.S. homes have a mortgage with a rate of 6% or lower, according to Realtor.com. Economists generally expect the average rate on a 30-year mortgage to remain near the mid-6% range this year. The recent fluctuations in mortgage rates underscore the importance of monitoring economic indicators and Federal Reserve decisions for those considering purchasing or refinancing a home.
FAQs
- Q: What is the current average rate on a 30-year U.S. mortgage?
A: The average rate on a 30-year U.S. mortgage is 6.3%. - Q: How do Federal Reserve decisions impact mortgage rates?
A: Federal Reserve decisions on interest rates can significantly influence mortgage rates, as they affect the overall direction of interest rates in the economy. - Q: What factors influence mortgage rates?
A: Mortgage rates are influenced by several factors, including the Federal Reserve’s interest rate policy decisions, bond market investors’ expectations for the economy and inflation, and the 10-year Treasury yield. - Q: Why did mortgage rates rise this week?
A: Mortgage rates rose this week due to a cautious approach signaled by Fed Chair Jerome Powell towards future interest rate cuts, leading to higher Treasury yields and subsequently higher mortgage rates.By ALEX VEIGA, AP Business Writer
Originally Published: September 25, 2025 at 12:07 PM EDT
