Average 30-Year Mortgage Rate Drops to 6.35%, Lowest in Nearly a Year

The average rate on a 30-year U.S. mortgage fell this week to 6.35%, its lowest level in nearly a year, Freddie Mac said Thursday, as Treasury yields pulled back ahead of an expected interest-rate cut from the Federal Reserve next week.

The long-term rate eased from 6.50% a week earlier. Rates for 15-year fixed-rate mortgages, popular with homeowners refinancing their loans, also declined, falling to 5.50% from 5.60% the prior week. A year earlier, the 30-year rate averaged about 6.20% and the 15-year about 5.27%.

Mortgage rates are shaped by multiple forces, including investors’ expectations for inflation and economic growth and the Federal Reserve’s policy path. Lenders often use the yield on 10-year Treasury notes as a benchmark for pricing home loans, so a slide in Treasury yields tends to reduce mortgage rates. Market participants have pushed down long-term yields in recent weeks amid growing bets that the Fed will begin cutting its benchmark short-term interest rate at its meeting of policymakers next week.

The easing in rates follows a pattern seen ahead of last year’s September Fed cut, when mortgage rates also retreated before briefly climbing again. After falling last year to a two-year low near 6.08%, the average 30-year rate subsequently rose, topping 7% by mid-January. Analysts caution that short-term moves in mortgage rates can be volatile and tied to shifts in Treasury yields and investor sentiment.

Federal Reserve officials have signaled openness to reducing the central bank’s policy rate if incoming economic data warrant it. Fed Chair Jerome Powell has indicated the possibility of easing policy amid signs of a softer labor market following weaker-than-expected job reports, including significant downward revisions to payroll gains for prior months. This year’s revised government data showed the U.S. job market was weaker than previously reported, and the latest weekly snapshot of initial unemployment benefit claims showed an increase in applicants, a possible indicator of rising layoffs.

Mortgage rates have been elevated since 2022, when they climbed from pandemic-era lows, and that rise has weighed on housing activity. Home sales and refinancing have remained subdued while the average 30-year mortgage rate hovered mostly above 6.5% for much of this year, contributing to a prolonged slump in the housing market.

Freddie Mac’s weekly survey is a widely followed gauge of conventional mortgage pricing, but the agency notes that individual borrowers’ rates can vary based on credit scores, down payments, loan size and other factors. Lenders also set rates based on operating costs and demand in secondary markets for mortgage-backed securities.

A move lower in mortgage rates could ease some borrowing costs for prospective buyers and homeowners weighing refinancing, but how much activity those lower rates generate will depend on broader economic conditions, credit availability and borrower qualifications. For now, the recent decline represents the first sustained pullback in several months and marks the lowest average 30-year rate since Oct. 10, when it was 6.32%.