U.S. 30-Year Mortgage Rate Falls to 6.58%, Lowest Since October

The average rate on a 30-year fixed mortgage in the United States has declined to 6.58%, down from 6.63% the previous week, as reported by mortgage buyer Freddie Mac. This marks the lowest level since October. A year ago, the rate stood at 6.49%.

The 15-year fixed-rate mortgage, commonly chosen by homeowners refinancing their loans, also saw a decrease, averaging 5.71% compared to 5.75% last week. A year prior, this rate was 5.66%.

Elevated mortgage rates have contributed to a slowdown in the U.S. housing market since early 2022, when rates began rising from the historically low levels experienced during the pandemic. Home sales declined last year to their lowest point in nearly three decades.

This marks the fourth consecutive week of declining rates. The current average for a 30-year mortgage is now at its lowest since October 24, when it averaged 6.54%.

Mortgage rates are influenced by various factors, including the Federal Reserve's interest rate policies and bond market investors' expectations regarding the economy and inflation. The 10-year Treasury yield, a key indicator used by lenders to price home loans, was at 4.29% at midday Thursday, slightly up from 4.24% late Wednesday.

The yield has decreased in recent weeks following weaker-than-expected July U.S. job market data, which has fueled speculation that the Federal Reserve may cut its main short-term interest rate next month.

A new inflation report released Thursday indicated that prices at the U.S. wholesale level increased by 3.3% last month compared to a year earlier, surpassing the 2.5% rate economists had forecast. This could signal higher inflation ahead.

Earlier this week, the Labor Department reported that consumer prices rose 2.7% in July from a year earlier, unchanged from June.

Higher inflation could lead to increased bond yields, which in turn may drive mortgage rates upward, even if the Federal Reserve cuts its key rate.

Economists generally anticipate that the average rate on a 30-year mortgage will remain above 6% this year. Recent forecasts by Realtor.com and Fannie Mae project the average rate will ease to around 6.4% by the end of this year.

While trends such as declining home listing prices and increased property availability in regions like the Sunbelt and West may favor buyers, affordability remains a significant challenge for many aspiring homeowners. Home price growth has slowed nationally, yet the median sales price of a previously occupied U.S. home reached an all-time high of $435,300 in June.

Joel Berner, senior economist at Realtor.com, noted, "Homebuyers who have been relegated to the sidelines by high financing costs got some encouragement in the past two weeks, but it remains to be seen if it's enough to get more of them back in the game."

The recent drop in mortgage rates has also led to an increase in refinancing activity. Mortgage applications rose 10.9% last week from the previous week, driven by homeowners seeking to refinance, according to the Mortgage Bankers Association. Refinance applications accounted for nearly 47% of all mortgage applications, with a 23% increase from the prior week—the strongest showing since April.

Applications for adjustable-rate mortgages (ARMs) surged 25% to their highest level since 2022, according to the MBA.

Many homeowners are opting to refinance without waiting for further rate decreases. Cash-out home refinancing activity reached a nearly three-year high in the April-June quarter, as homeowners tapped into the equity gains accumulated after years of rising home prices.