US mortgage rates fall to 6.23% after three-week climb

The average rate on a 30-year U.S. mortgage ended a three-week streak of increases, reflecting a pullback in long-term U.S. Treasury bond yields.

The average long-term mortgage rate fell to 6.23% from 6.26% last week, mortgage buyer Freddie Mac said Wednesday. A year ago, the rate averaged 6.81%.

Just four weeks ago, the average rate was at 6.17%, its lowest level in more than a year.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell this week. The rate averaged 5.51%, down from 5.54% last week. A year ago, it was 6.10%, Freddie Mac said.

Mortgage rates are influenced by several factors, including the Federal Reserve‘s interest rate policy decisions and investors’ expectations for the economy and inflation. They generally follow the trajectory of the 10-year Treasury yield, which lenders use to price home loans.

The 10-year yield was at 4.01% at midday on Wednesday. That’s down from about 4.13% a week ago.

When mortgage rates ease, homebuyers’ purchasing power improves.

Easing mortgage rates this fall helped lift sales of previously occupied U.S. homes in October, marking the fourth straight month of annual gains.

Still, affordability remains a challenge for many aspiring homeowners after years of skyrocketing prices. Uncertainty over the economy and job market is also keeping many would-be buyers on the sidelines.

That’s helped keep sales of previously occupied U.S. homes stuck at around a 4-million annual pace since 2023. Historically, sales have typically hovered around 5.2 million a year.

Mortgage rates began declining this summer ahead of the Federal Reserve’s decision in September to cut its main interest rate for the first time in a year amid signs the labor market was slowing. The Fed lowered its key interest rate again last month, although Fed Chair Jerome Powell cautioned that further rate cuts weren’t guaranteed.

Still, comments from Fed officials have fueled speculation that the central bank will cut interest rates again at its December meeting. Wall Street traders are betting on a nearly 83% probability that the Fed will cut next month, according to data from CME Group.

“It is looking increasingly likely that the Fed will cut interest rates when it meets on Dec. 10,” said Lisa Sturtevant, chief economist at Bright MLS. “However, we should not expect that to translate into a big drop in mortgage rates.”

The central bank doesn’t set mortgage rates, and even when it cuts its short-term rates, that doesn’t necessarily mean rates on home loans will decline.

Last fall, after the Fed cut its rate for the first time in more than four years, mortgage rates marched higher, eventually reaching just above 7% in January this year. At that time, the 10-year Treasury yield was climbing toward 5%.

Recent forecasts by economists at the National Association of Realtors and First American call for the average 30-year mortgage rate to drop to around 6% next year.