U.S. Mortgage Rates Edge Down to 5.52%
U.S. mortgage rates experienced a slight decrease this week, falling to an average of 5.52%, according to Freddie Mac. This is down from 5.53% the previous week and substantially lower than the 5.63% recorded a year ago.
Thes rates are heavily influenced by factors including decisions made by the Federal Reserve regarding interest rate policy,and the expectations of bond market investors concerning the economy and inflation. Mortgage rates generally track the 10-year Treasury yield, which currently sits at 4.02% as of midday Thursday – a decrease from approximately 4.14% at the same time last week.
The decline in mortgage rates began in July,coinciding with the Federal Reserve’s decision in July to cut its main interest rate for the first time in a year,a move prompted by concerns about the U.S. job market. At their September meeting,Fed officials projected two further rate cuts this year and one in 2026. However, these forecasts are subject to change, particularly if inflation rises due to factors like the Trump administration’s tariffs and escalating trade tensions with China.
Despite potential further cuts to the Fed’s short-term rate, a continued decline in mortgage rates isn’t guaranteed. Following a rate cut last fall, mortgage rates actually increased, peaking just above 7% in January of this year.
Lisa Sturtevant, chief economist at Luminous MLS, cautioned that rates are unlikely to fall much further, advising potential buyers against waiting for significantly lower rates, as they may face higher home prices without a corresponding improvement in mortgage affordability.
The average 30-year mortgage rate has remained above 6% since September 2022, contributing to a slump in the housing market. Sales of existing U.S. homes fell to a nearly 30-year low last year, and sales are currently lagging behind those of the same period in 2023.
However, the recent dip in rates has spurred some homeowners who purchased after rates climbed above 6% to seek refinancing. Mortgage applications fell 1.8% last week, but refinance applications comprised 53.6% of the total, a slight increase from the week prior.
Adjustable-rate mortgages are also gaining traction, representing 9.3% of all mortgage applications last week due to their typically lower initial interest rates.
For refinancing to become broadly appealing, mortgage rates would need to fall below 6%, as approximately 80% of U.S. homeowners with a mortgage currently have rates below that level, with 53% holding rates below 4%. Economists generally predict the average 30-year mortgage rate will remain near the mid-6% range for the remainder of the year.
