The average rate on a 30-year U.S. mortgage fell to a two-year low, boosting homebuyers’ purchasing power as they navigate a housing market with prices near all-time highs.
The rate fell to 6.08% from 6.09% last week, mortgage buyer Freddie Mac said on Thursday. A year ago, the average interest rate was 7.31%.
The last time the average rate was lower was on September 15, 2022, when it was 6.02%.
Borrowing costs for 15-year fixed-rate mortgages, popular among homeowners looking to refinance their home loan at a lower rate, rose slightly this week. The average rate rose to 5.16% from 5.15% last week. A year ago, it averaged 6.72%, Freddie Mac said.
Mortgage rates are affected by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy decisions. That could shift the trajectory of the 10-year Treasury yield, which lenders use as a guide for pricing home loans.
The average rate on a 30-year mortgage has fallen from 7.22% in May, its peak so far this year. Prices have mostly fallen since July in anticipation last week’s move by the Fed to cut its key interest rate for the first time in more than four years.
Fed officials also signaled that they expect further cuts this year and in 2025 and 2026. The rate cuts should lead to lower mortgage borrowing costs over time.
“Given the downward trajectory of interest rates, refinancing activity continues to pick up, creating opportunities for many homeowners to reduce their monthly mortgage payment,” said Sam Khater, Freddie Mac’s Chief Economist. “In the meantime, many who want to buy a home are playing the waiting game to see if interest rates decline further when additional economic data is released in the coming weeks.”