The average rate on a 30-year mortgage in the U.S. slipped to its lowest level in two years, boosting home shoppers’ purchasing power as they navigate a housing market with prices near all-time highs.
The rate dipped to 6.08% from to 6.09% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 7.31%.
The last time the average rate was lower was on September 15, 2022, when it was 6.02%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners seeking to refinance their home loan to a lower rate, increased 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 influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy decisions. That can move the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.
The average rate on a 30-year mortgage is down from 7.22% in May, its peak so far this year. Rates have been mostly declining since July in anticipation of last week’s move by the Fed to cut its main interest rate for the first time in more than four years.
Fed officials also signaled they expect further cuts this year and in 2025 and 2026. The rate cuts should, over time, lead to lower borrowing costs on mortgages.
“Given the downward trajectory of rates, refinance activity continues to pick up, creating opportunities for many homeowners to trim their monthly mortgage payment.,” said Sam Khater, Freddie Mac’s chief economist. “Meanwhile, many looking to purchase a home are playing the waiting game to see if rates decrease further as additional economic data is released over the next several weeks.”