Are homebuyers about to see affordability improve at last?
The average 30-year US mortgage rate has slid to its lowest level so far in 2025, Freddie Mac said Thursday, strengthening hopes that homebuyers could finally start seeing some rate relief.
That rate dipped to 6.58% this week, just slightly higher than the same time last year (6.49%), as 15-year fixed mortgage rates also fell (to 5.71%). The slump means borrowing costs on a 30-year mortgage are now at their lowest level since last October.
Elevated mortgage rates this year have kept a dampener on the US housing market, keeping scores of homebuyers on the sidelines as they wait for borrowing costs to ease.
The 30-year rate remains below the 52-week average of 6.68% and ticked five basis points lower from the prior week. A drop since the beginning of August in 10-year US Treasury yields, a key indicator of where US mortgage rates are headed, helped drive that trend.
Speculation has intensified this week that the Federal Reserve could cut its own funds rate for the first time this year in September after the latest consumer price index (CPI) data showed inflation is remaining largely under control.
While a Fed cut wouldn’t directly cause mortgage rates to fall, increasing confidence in financial markets about an impending reduction spurred this week’s downturn in Treasury yields.
Fannie Mae believes the 30-year average will move slightly lower by the end of the year, and indicated in its latest projection that it expects it to hit about 6.4% by the end of 2025. By the end of 2026, that rate is forecast to slip further to 6.0%.
Rates have now fallen for four weeks in a row, and some economists believe even a moderate change in borrowing costs could help brighten prospects for a stagnant housing market.
The national market saw a sharp correction as rates spiked immediately after the pandemic, but First American deputy chief economist Odeta Kushi said this week that conditions are slowly shifting back towards buyers – even if affordability remains strained.
“Affordability is likely to improve slightly compared to the end of 2024 but will still remain over 30% less affordable than in early 2022, before the Fed started increasing rates,” she wrote.
Buyers, she said, could start seeing “mild rate relief and improved affordability even earlier as markets continue to adjust.”
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