U.S. Mortgage Rates Drop to Lowest Level Since Late October

The Federal Reserve’s monetary policy also plays a significant role in shaping mortgage rates.

Mortgage rates in the United States eased again this week, with the average rate on a 30-year fixed mortgage slipping to 6.69%, its lowest level since October 24, according to Freddie Mac’s data released Thursday. The rate dropped from last week’s 6.81%, marking a gradual decline from the 7.03% average seen a year ago. Rates for 15-year fixed mortgages, favored by homeowners refinancing to lower rates, also fell this week. The average declined to 5.96%, down from 6.1% last week and 6.29% a year ago. These shifts reflect broader movements in the 10-year Treasury yield, which lenders use as a pricing benchmark for home loans. Despite these decreases, housing affordability challenges persist. Elevated borrowing costs and climbing home prices have sidelined many potential buyers, pushing U.S. home sales toward their worst performance since 1995. The affordability crunch is compounded by persistently high home prices, which have been rising nationally, albeit at a slower pace.

The Federal Reserve’s monetary policy also plays a significant role in shaping mortgage rates. While the Fed doesn’t directly set these rates, its moves to lower its benchmark interest rate from a two-decade high in September have influenced the trajectory of Treasury yields and, in turn, mortgage rates. Encouragingly, mortgage application activity has seen a notable rise. The Mortgage Bankers Association (MBA) reported a 2.8% increase in mortgage applications last week, adjusted for the Thanksgiving holiday. Applications for purchase loans hit their highest level since January, with demand climbing for a fourth consecutive week.

Looking ahead, housing economists project the average 30-year mortgage rate to hover around 6.5% through 2024, offering limited relief for prospective homebuyers. While the recent dip in rates may signal a slight improvement in affordability, the housing market remains constrained by historically high prices and cautious buyer sentiment. For now, prospective homeowners are cautiously optimistic, waiting for sustained declines in borrowing costs to unlock greater opportunities for homeownership.