30-Year Mortgage Rate Falls Again, Now at 6.35%

Mortgage rates fell again this week, providing some relief to home buyers and attracting more sellers from the sidelines.

The average rate on 30-year mortgages, the most popular home loan in the United States, fell to 6.35 percent this week, Freddie Mac reported on Thursday. That was down from the 6.46 percent average a week earlier, and the lowest level since May 2023.

Despite a steady decline in borrowing costs in recent months, a significant uptick in activity in the housing market may wait until officials at the Federal Reserve cut interest rates.

Mortgage rates peaked at nearly 7.8 percent late last year, tracking the Fed’s policy rate, which officials had raised aggressively to fight a surge in inflation. Jerome H. Powell, the Fed chair, said recently that the “time has come” for a shift in policy, a clear signal that rates would soon come down.

After more than a year of holding the central bank’s policy rate at the highest level in more than two decades, Fed officials are widely expected to announce a cut at their meeting in mid-September. Those expectations have driven down market-based yields in government bond markets, which also influence mortgage rates.

Mortgage costs are still twice as high as they were three years ago, when the average 30-year rate stood at around 3 percent.

“Rates are expected to continue their decline, and while potential home buyers are watching closely, a rebound in purchase activity remains elusive until we see further declines,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

Easing mortgage rates have appeared to spur some activity already. New home sales rose more than 10 percent last month, the Census Bureau reported, a stronger increase than economists expected. Even so, prices for new homes have been roughly flat, while existing-home prices have continued to rise, a sign of “incentives offered by builders to encourage sales, as well as a trend toward building smaller homes,” according to analysts at Oxford Economics.

The analysts expect overall home-price growth, which has been running at around 5 percent year over year, to slow to 3 percent by the end of the year. Although lower mortgage rates are expected to spur more demand from buyers, that will be at least partly offset by a higher supply of homes for sale, limiting the pressure on prices.

Many homeowners have felt locked into low rates on their existing mortgages and have kept their houses off the market, reluctant to become buyers themselves.

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