Average U.S. long-term mortgage rate drops to 6.3%, back to lowest level in about a year

The average rate on a 30-year U.S. mortgage fell slightly this week, returning to its lowest level in about a year.

The average long-term mortgage rate fell to 6.3% from 6.34% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.32%.

The modest drop returns the average rate to where it was two weeks ago, after a series of declines reduced home loan borrowing costs to their lowest level since early October 2024.

Borrowing costs for 15-year fixed-rate mortgages, popular among homeowners refinancing their home loans, also decreased this week. The average rate fell to 5.53% from 5.55% last week. A year ago, it was 5.41%, Freddie Mac said.

“Despite the decline, rates continue to fluctuate within a narrow band they have maintained since mid-September, as markets remain in a holding pattern amid fiscal and monetary uncertainty, including the current government shutdown,” said Anthony Smith, senior economist at Realtor.com.

Mortgage rates are influenced by several factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations about the economy and inflation. They generally track the path of the 10-year Treasury yield, which lenders use as a guide in pricing mortgage loans.

The 10-year yield was at 4.13% at midday Thursday, down from about 4.09% at the same time last week. The yield has been trending higher since falling to around 4.02% on September 11.

In late July, mortgage rates began to decline in the run-up to the Federal Reserve’s widely expected decision last month to cut its main interest rate for the first time in a year amid growing concern about the U.S. labor market.

However, Federal Reserve Chairman Jerome Powell has since expressed a cautious approach to future interest rate cuts. This is in stark contrast to other members of the Fed’s rate-setting committee, particularly those appointed by President Donald Trump, who are pushing for faster cuts.

Even if the Federal Reserve chooses to lower its short-term rate further, that doesn’t necessarily mean mortgage rates will continue to fall. Last fall, after the Federal Reserve cut its rate for the first time in more than four years, mortgage rates rose, eventually reaching just over 7% in January of this year.

The average rate on a 30-year mortgage has remained above 6% since September 2022, the year mortgage rates began rising from record lows. The real estate market has been in crisis since then.

Sales of previously occupied U.S. homes fell last year to their lowest level in nearly 30 years. So far this year, sales are below where they were at this time in 2024.

Still, the recent drop in mortgage rates could set the stage for a modest increase in sales in the coming weeks, based on recent data on contract signings.

The National Association of Realtors’ seasonally adjusted U.S. pending home sales index rose 4% in August from the previous month and 3.8% from the same month last year. There is typically a one to two month lag between signing a contract and when the sale is finalized, making pending home sales an indicator of future completed home sales.

Meanwhile, many homeowners who purchased in recent years after rates rose well above 6% have decided to refinance their existing loan at a lower rate.

Mortgage applications, which include loans to buy a home or refinance an existing mortgage, fell 4.7% last week from the previous week, according to the Mortgage Bankers Association. But mortgage refinancing loan applications accounted for 53.3% of total applications.

More and more potential home buyers are also applying for an adjustable rate mortgage. These loans, which typically offer lower initial interest rates than traditional 30-year fixed-rate mortgages, accounted for 9.5% of all mortgage applications last week.

However, mortgage rates will have to fall below 6% to make refinancing an attractive option for a broader segment of homeowners. That’s because about 80% of U.S. homes with a mortgage have a rate below 6% and 53% have a rate below 4%, according to Realtor.com.

Economists generally forecast that the average rate on a 30-year mortgage will remain near the mid-6% range this year.