30-Year Mortgage Rate Hits Lowest Level in Over a Year
The 30-year mortgage rate in the U.S. has dropped to its lowest level in over a year. For the fourth consecutive week, this average rate has fallen, reaching 6.17% from 6.19% the previous week. A year earlier, the rate stood at 6.72%. This decline is a positive development for homebuyers and those looking to refinance their existing loans.
Latest Trends in Mortgage Rates
Freddie Mac reported that the last time the 30-year mortgage rate was lower than the current figure was on October 3, 2024, when it was 6.12%. Additionally, 15-year fixed-rate mortgages, often chosen for refinancing, saw their average rate decrease to 5.41% from 5.44% last week, compared to 5.99% a year ago.
Factors Influencing Mortgage Rates
Several elements influence mortgage rates, including:
- The Federal Reserve’s interest rate policies
- Expectations from bond market investors regarding the economy
- Inflation trends
Typically, mortgage rates align with the 10-year Treasury yield, a key metric lenders use in pricing home loans. Since September 2022, the average rate on a 30-year mortgage has stayed above 6%, a trend that has contributed to a slowdown in the housing market.
Current Impact on the Housing Market
Home sales in the U.S. experienced a significant decline last year, marking the lowest level in nearly three decades. This year, while sales remained sluggish initially, they picked up pace last month, making it the fastest since February, as a result of easing mortgage rates.
The Federal Reserve’s Decisions
The decline in mortgage rates started in July, coinciding with the Federal Reserve’s decision to cut its key interest rate for the first time in a year. This move aimed to support a slowing job market. Nonetheless, Fed Chair Jerome Powell has cautioned that further cuts during the next meeting in December are not guaranteed.
Market Reactions and Future Projections
In response to these developments, the 10-year Treasury yield rose to 4.08% after staying below 4% for two weeks. If inflation continues to rise, bond investors may demand higher yields, potentially impacting mortgage rates.
- Mortgage applications rose by 7.1% last week.
- Refinancing applications grew by 9% compared to the previous week.
- Such applications have more than doubled from the same week last year.
Despite the recent drop in rates, refinancing will likely remain attractive primarily to homeowners whose current mortgage rates exceed 6%. Approximately 80% of U.S. homes with a mortgage have rates below this threshold, with 53% below 4%, according to Realtor.com.
