The average rate on a 30-year mortgage in the U.S. approached 6% this week, its lowest level since early February 2023.
The rate fell to 6.09% from 6.20% last week, mortgage buyer Freddie Mac said Thursday.
A year ago, the average rate was 7.19%.
The last time the average rate was this low was on February 2, 2023.
Borrowing costs for 15-year fixed-rate mortgages, popular with homeowners looking to refinance their home loan to a lower rate, also declined this week.
The average rate fell to 5.15% from 5.27% last week.
A year ago, the average was 6.54%, 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 could change the path of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.
Rates have been mostly on the decline since July as signs of falling inflation and a cooling labor market raised expectations of a Fed cut, sending the yield on 10-year Treasury notes lower.
That rate cut came Wednesday, when the Federal Reserve lowered its main 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.
Rate cuts should, over time, lead to lower borrowing costs for mortgages.
The latest rate cut should help spur demand for refinancing and home purchase loans, said Sam Khater, chief economist at Freddie Mac.
“While mortgage rates don’t directly follow the Fed’s moves, this first rate cut in more than four years will have an impact on the housing market,” Khater said. “The decline in mortgage rates over the past few weeks indicates that this cut was largely on the cards, but we expect rates to fall further, leading to more activity in the housing market.”
