Americans struggling with high home borrowing costs have received favorable news. For the week ending October 23, the average rate for a 30-year fixed mortgage dropped to 6.19%, down from 6.27% the previous week, based on data from Freddie Mac. This marks the lowest level recorded in over a year, potentially prompting sidelined homebuyers to re-enter the market as home prices begin to soften in various metropolitan areas.
Mortgage Rates Drop to 2025’s Lowest Level
At the beginning of 2025, rates surpassed 7%. Today, they sit nearly one full percentage point lower. Sam Khater, Freddie Mac’s chief economist, noted this significant decline. While the recent government shutdown has halted most economic data releases, the one-week drop in mortgage rates stands out as a critical indicator.
Factors Influencing Mortgage Rates
Despite being under federal conservatorship, Freddie Mac continues to report its weekly survey. The recent decline in home borrowing rates coincides with expectations of a forthcoming rate cut by the Federal Reserve, which is now seen as a near certainty, according to Kara Ng, a senior economist at Zillow Home Loans. Lower mortgage rates and easing home prices may enhance housing affordability for many Americans aspiring to own a home.
- The typical home sold in September was 1.4% below its asking price, the largest September discount since 2019.
- This price reduction occurred prior to the pandemic, which had caused home prices to increase dramatically.
Rising Home Sales
Reports indicate that September saw a significant increase in the sales of existing homes, marking the fastest expansion in seven months. According to Lawrence Yun, the chief economist for the National Association of Realtors (NAR), the fall in mortgage rates is stimulating home sales. Improvements in housing affordability are contributing to this upward trend.
Although the Federal Reserve does not have direct control over mortgage rates, its decisions can influence them through their effect on the 10-year Treasury yield. Market analysts predict that, barring unforeseen developments, mortgage rates may remain within the 6% to 7% range observed in recent years.
As the housing market adapts to these changes, buyers may find renewed hope, moving closer to homeownership in an environment of improving affordability.
