Mortgage rates drop to the lowest level in a year, opening 'an important window' for buyers

By Aarthi Swaminathan

Many buyers are still feeling spooked by economic conditions

Mortgage rates have plunged to their lowest level in 12 months, giving home buyers some room to breathe.

The 30-year fixed-rate mortgage averaged 6.19% as of Oct. 23, according to a weekly report from Freddie Mac (FMCC).

The 30-year was down 8 basis points from a week ago. The last time the 30-year mortgage fell to this level was in early October 2024.

A separate, daily survey of lenders by Mortgage News Daily said the 30-year fixed-rate mortgage fell to 6.17% as of Oct. 22.

Rates are falling because investors are betting on a rate cut by the Federal Reserve during its upcoming meeting next week to stimulate the U.S. economy.

That pushed the 10-year Treasury down, which in turn pushed mortgage rates down. The 30-year mortgage rate moves in tandem with the 10-year Treasury yield.

Related: Jittery investors are pushing down Treasury yields ahead of crucial CPI inflation report

"From a consumer standpoint, this is an important window," Samir Dedhia, chief executive of One Real Mortgage, said in a statement.

"Homeowners are reacting: refinance applications are rising and the market is seeing more interest again among homebuyers," he said. "It might not be a dramatic drop, but when rates hover near the mid-6% range, every fraction of a point counts."

But will lower rates be enough to awaken a stagnant housing market? It's unclear.

Economists argue that rates - or home prices - need to drop significantly to boost sales.

"Our view all along has been that it will take more meaningful declines in mortgage interest rates and/or more meaningful declines in house prices to break the trend sales rate out of what over the past two years has been a notably narrow range," Richard Moody, chief economist at Regions Financial Corporation, wrote in a note.

Home sales grew 1.5% in September from the previous month, the National Association of Realtors reported earlier Thursday. Realtors are optimistic that falling rates will boost sales in the coming weeks and months.

Related: Home sellers have a 'tough pill to swallow' this fall, real-estate agents warn

However, the housing market remains unaffordable for many buyers.

"Affordability likely improved further at the margin in September, as mortgage rates fell further," Stephen Stanley at Santander U.S. Capital Markets wrote in a note. "But it remains far short of the historical norm."

"The buyer of a median-priced home of $425,000, using a 20% down payment and a 6.25% rate for a 30-year mortgage, is facing a $2,640 monthly payment, including property taxes and home insurance," George Ratiu at the National Apartment Association said in a statement.

-Aarthi Swaminathan

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10-23-25 1216ET