The average long-term mortgage rate in the United States has shed more than a full percentage point. Currently, it’s getting close to its lowest point since 2025. With this week’s action, the Federal Reserve has finally made its first interest rate cut in a year. This decision addresses the increasing concerns of American taxpayers regarding the state of the U.S. job market. Consequently, cost in home loans have loosened, giving more aid to potential home buyers.
In reality, mortgage rates have been on a downward trend since July. In a very high correlation, they track the movement of the 10-year Treasury yield. On Thursday, the 10-year Treasury yield was around 4.02%, down from about 4.14% last week. This decrease in Treasury yields is typically a precursor to a corresponding drop in mortgage rates, which means consumers get to enjoy lower borrowing costs.
As Freddie Mac recently reported, the average rate for a 30-year fixed mortgage has declined to 6.27%. This is a drop from 6.30% at this time last week. This new rate is well below last year’s 6.44% average at this time. It has been above 6% every month since September 2022. Borrowing costs for 15-year fixed-rate mortgages relaxed during this time.
Though these rates are heartening, they follow years of turmoil in the housing sector. Sales of used U.S. homes plummeted in 2022, hitting a near 30 year low. Even now, they’re still on the slow side compared to numbers from this exact time in 2024. These disappointing sales numbers show us that even with lower mortgage rates, many Americans are not ready to buy just yet.
At its September monetary policy meeting, Federal Reserve officials signaled at least two additional cuts to the federal funds rate by year’s end. They predicted one more rate cut in 2026. Experts caution that any Fed cut to its short-term interest rate may not translate into lower mortgage rates. The relationship between these rates often isn’t that simple at all. The relationship between Fed rates and mortgage rates is not straightforward and depends on many economic factors.
