Mortgage Rates Fall to Lowest Average in Nearly a Year
More buyers may be coming into the picture as mortgage rates decline.
Mortgage rates are once again the center of attention in the U.S. housing market. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.50% this week, the lowest level since October 2024. While the decline may seem modest, even a small adjustment has an outsized effect on affordability and buyer psychology.
Why the Drop in Rates Matters
“Every change in mortgage rates—even the slightest—is noticed by prospective home buyers,” says Jessica Lautz, deputy chief economist at the National Association of REALTORS® (NAR).
At the current average rate of 6.50%, buyers purchasing a $400,000 home with a 20% down payment would see their monthly payment drop to $2,023. Just a few weeks ago, when rates averaged 6.72%, that same payment was $2,232—about $200 more per month. For many households, this difference determines whether a home is within budget.
Buyers Are Rate-Sensitive
The Mortgage Bankers Association (MBA) reports that mortgage applications for home purchases are up 17% compared to the same week last year. This shows how sensitive buyers remain to even small shifts in rates.
Key takeaways:
Stability matters: Lautz notes that buyers value predictability in rates, as it helps them plan and budget with more confidence.
Refinance activity is rising: Refinancing applications are up 20% year-over-year, now making up 47% of all mortgage activity, the highest share since October 2024.
Life changes drive movement: While some homeowners remain locked into sub-4% mortgages, others are selling or refinancing due to job relocations, family needs, or lifestyle changes.
Expert Outlook: What’s Next for Rates?
Sam Khater, Freddie Mac’s chief economist, says the gradual decline in rates has fueled “increasing optimism for new buyers and current owners alike.” As rates continue to trend down, more homeowners will have opportunities to refinance.
Looking ahead:
NAR forecasts mortgage rates will remain in the mid-6% range through 2025, with a possible decline toward 6% in 2026.
The Federal Reserve is expected to cut short-term interest rates in September, which could trigger further easing in mortgage rates. However, Lautz cautions that “it’s not a one-to-one” effect and any change may take time to ripple through the housing market.
Current Mortgage Rate Averages (Week Ending Sept. 4, 2025)
According to Freddie Mac:
30-year fixed-rate mortgages: 6.50% (down from 6.56% last week; 6.35% a year ago).
15-year fixed-rate mortgages: 5.60% (down from 5.69% last week; 5.47% a year ago).
What This Means for Buyers and Sellers
For Buyers: Even with rates in the 6% range, the recent decline provides more purchasing power and predictability. Buyers should shop around with mortgage brokers to secure the best possible rate and lock in before further market shifts.
For Sellers: A lower rate environment can expand the pool of qualified buyers, helping homes sell faster and reducing the need for steep price cuts.
For Homeowners: Refinancing is becoming increasingly attractive again, particularly for those who purchased or refinanced at higher rates in 2023–2024.
Final Takeaway
While rates remain higher than the ultra-low levels of 2020–2021, the latest dip to 6.50% marks a meaningful shift. Buyers, sellers, and current homeowners should monitor the market closely as the Federal Reserve’s decisions this fall could bring additional changes.
The bottom line: small rate changes = big impacts on affordability, demand, and overall housing market momentum.
Original Article Content by Melissa Dittmann Tracey | Contributing editor for REALTOR®
Magazine and editor of the Styled, Staged & Sold blog.