The average rate for a 30-year U.S. mortgage has dropped to its lowest point in nearly 10 months, providing a much-needed boost for homebuyers and potentially revitalizing a sluggish housing market. According to Freddie Mac, this week’s rate fell to 6.58%, down from 6.63% last week, and compared to 6.49% a year ago.
Similarly, the average rate for 15-year fixed-rate mortgages, often chosen by homeowners looking to refinance, also saw a decline—dropping to 5.71% from 5.75% last week, and compared to 5.66% a year prior.
High mortgage rates have contributed to a prolonged slump in the housing market, which has been struggling since early 2022 when rates began to rise from their historic lows during the pandemic. Last year, home sales reached their lowest levels in almost 30 years.
This marks the fourth consecutive week of falling rates, and the latest 30-year mortgage rate is the lowest since late October, when it averaged 6.54%.
Mortgage rates are influenced by various factors, including the Federal Reserve’s interest rate policies and the bond market’s expectations regarding the economy and inflation. The primary measure is the 10-year Treasury yield, which stood at 4.29% recently, slightly higher than the previous day’s 4.24%.
There is speculation that the Federal Reserve may lower its main short-term interest rate next month, spurred by disappointing job market data. While a cut could benefit the job market and the economy overall, it also risks increasing inflation—a concern as President Trump’s policies may drive up prices for American consumers.
This week, a fresh inflation report indicated that wholesale prices surged 3.3% over the past year, surpassing economists’ expectations of 2.5%. This suggests that inflation may continue to rise. Earlier reports showed that consumer prices increased by 2.7% in July compared to the previous year, remaining steady since June.
Higher inflation could pressure bond yields, causing mortgage rates to rise, even if the Fed cuts its key rate. Most economists predict that the average 30-year mortgage rate will stay above 6% throughout this year. Recent forecasts suggest it may dip to around 6.4% by year-end, but that might not be enough to alleviate affordability concerns.
Although home price growth has slowed, the median price for previously occupied U.S. homes hit a record high of $435,300 in June. “Homebuyers who have been sidelined by high financing costs may find some hope from recent rate drops, but whether this will lead to increased activity remains uncertain,” noted Joel Berner, senior economist at Realtor.com.
The decline in mortgage rates has prompted many homeowners to reconsider refinancing their loans. Mortgage applications surged by 10.9% last week, largely driven by homeowners seeking to refinance, according to the Mortgage Bankers Association. Refinance applications represented nearly 47% of all mortgage applications—with a notable 23% increase from the prior week, the strongest increase since April.
Notably, applications for adjustable-rate mortgages (ARMs) rose by 25%, reaching their highest level since 2022. Many homeowners are moving quickly to refinance without waiting for rates to drop further, capitalizing on the equity gains accumulated during years of rising home values.
