30-Year Mortgage Rate Drops to 6.09% After Fed Rate Cut

Mortgage rates dropped again this week, extending a monthslong decline fueled by expectations of a cut in interest rates by the Federal Reserve, which came into fruition on Wednesday.

The average rate on 30-year mortgages, the most popular home loan in the United States, fell to 6.09 percent this week, Freddie Mac reported on Thursday. That was down from 6.2 percent a week earlier, reaching the lowest level since February 2023. Rates have fallen about one percentage point over the past four months, and are significantly lower than their peak at nearly 7.8 percent late last year.

The downward drift in rates toward 6 percent is “reviving purchase and refinance demand for many consumers,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

Here’s what else to know about the trends in mortgage rates:

• The Fed’s decision on Wednesday to slash its benchmark interest rate by a higher-than-usual half percentage point was already partly reflected in mortgage rates over the past few months. Rates on 30-year fixed-rate mortgages tend to track the yield on 10-year Treasury bonds, which can be influenced by market expectations for Fed moves.

• Prospective buyers and sellers may not see a drastic drop in mortgage rates as a result of the Fed’s move this week, economists said. The Fed’s rate cut came alongside economic projections by officials that suggested a rapid pace of rate cuts in the months ahead, which could lead to even lower mortgage costs. “Declining mortgage rates over the last several weeks indicate this cut was mostly baked in, but we expect rates to fall further, sparking more housing activity,” Mr. Khater said.

• Mortgage rates are still twice as high as they were three years ago, at the height of the pandemic, when the average 30-year rate was around 3 percent. Many potential sellers remain reluctant to put their homes on the market, unwilling to part with lower rates on their existing mortgages. Even with this week’s drop, there is a notable gap between current mortgage rates and those many homeowners locked during the pandemic.

• Existing home sales fell 2.5 percent in August, the National Association of Realtors reported on Thursday. But there are signs that the housing market could eventually get a boost from falling mortgage rates: As rates fall toward 6 percent, more prospective sellers could list their homes, boosting inventory, according to analysts at Oxford Economics.

• Some banks and mortgage lenders said they were already seeing an uptick in interest among prospective buyers, tied to the Fed’s rate cutting cycle. “This is the moment we’ve been waiting for and millions of borrowers across the country will benefit from this decision,” said Alex Elezaj, chief strategy officer at United Wholesale Mortgage. But home prices remain high, which could continue to constrain first-time buyers in particular, despite cheaper loan payments.