LDN Business - US Mortgage Rates

Average rate on a 30-year mortgage drops to lowest level since October

[August 15, 2025] By ALEX VEIGA

The average rate on a 30-year U.S. mortgage fell this week to its lowest level in nearly 10 months, giving prospective homebuyers a sorely needed boost in purchasing power that could help inject life into a stagnant housing market.

The long-term rate fell to 6.58% from 6.63% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.49%.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell. The average rate dropped to 5.71% from 5.75% last week. A year ago, it was 5.66%, Freddie Mac said.

Elevated mortgage rates have helped keep the U.S. housing market in a sales slump since early 2022, when rates started to climb from the rock-bottom lows they reached during the pandemic. Home sales sank last year to their lowest level in nearly 30 years.

This is the fourth week in a row that rates have come down. The latest average rate on a 30-year mortgage is now at its lowest level since Oct. 24, when it averaged 6.54%.

Mortgage rates are influenced by several factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations for the economy and inflation.

The main barometer is the 10-year Treasury yield, which lenders use as a guide to pricing home loans. The yield was at 4.29% at midday Thursday, up slightly from 4.24% late Wednesday.

The yield has come down the last couple of weeks after weaker-than-expected July U.S. job market data fueled speculation that the Fed will cut its main short-term interest rate next month.

A Fed rate cut could give the job market and overall economy a boost, but it could also fuel inflation just as President Trump’s tariff policies risk raising prices for U.S. consumers.

Meanwhile, a new inflation report Thursday showed prices at the U.S. wholesale level jumped 3.3% last month from a year earlier. That's was well above the 2.5% rate that economists had forecast, and it could hint at higher inflation ahead.

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Earlier this week, the Labor Department said consumer prices rose 2.7% in July from a year earlier, unchanged from June.

Higher inflation could push bond yields higher, driving mortgage rates upward in turn, even if the Fed cuts its key rate.

Economists generally expect the average rate on a 30-year mortgage to remain above 6% this year. Recent forecasts by Realtor.com and Fannie Mae project the average rate will ease to around 6.4% by the end of this year.

That may not be low enough to make a difference. While trends like declining home listing prices and more properties on the market in the Sunbelt and West now favor buyers, affordability remains a major hurdle for many aspiring homeowners.

Home price growth has slowed nationally, but the median sales price of a previously occupied U.S. home still climbed to an all-time high of $435,300 in June.

“Homebuyers who have been relegated to the sidelines by high financing costs got some encouragement in the past two weeks, but it remains to be seen if it’s enough to get more of them back in the game,” said Joel Berner, senior economist at Realtor.com.

The recent drop in mortgage rates has spurred many homeowners to refinance, however.

Mortgage applications jumped 10.9% last week from the previous week as rates eased, boosted by homeowners seeking to refinance, according to the Mortgage Bankers Association.

Home loan refinance applications made up nearly 47% of all mortgage applications. Refi loan applications jumped 23% from a week earlier -- the strongest showing since April.

Meanwhile, applications for adjustable-rate mortgages, or ARMs, soared 25% to their highest level since 2022, MBA said.

Many homeowners aren’t waiting for rates to ease further before refinancing. Cash-out home refinancing activity surged to a nearly three-year high in the April-June quarter, as homeowners tapped some of the equity gains built up after years of soaring home prices.

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