After months of sluggish activity in the U.S. housing market, potential buyers may finally have reason to re-enter. Mortgage rates are sinking – and quickly.
The 30-year fixed mortgage rate averaged 6.35% for the week ending September 11, down from 6.50% the previous week, according to Freddie Mac. This marks the steepest weekly drop so far in 2025.
The fall in borrowing costs comes as the bond market signals growing concerns over the U.S. economy. New data has revealed that the labor market is far weaker than previously believed, fueling expectations that the Federal Reserve will slash interest rates aggressively in the coming months.
“In anticipation that the Federal Reserve will cut interest rates aggressively to support the economy, investors have driven mortgage rates lower,” said Kara Ng, senior economist at Zillow.
Although the Fed doesn’t directly control mortgage rates, they typically move in tandem with the 10-year Treasury yield, which dropped to its lowest level since April. That earlier decline had been triggered by President Donald Trump’s tariff announcement, which raised fears of a broader economic slowdown.
The sharp rate decline could breathe new life into a housing market that has been weighed down by high mortgage costs, rising insurance premiums, and stubbornly expensive home listings. Many buyers have chosen to sit on the sidelines in recent months.
However, signs of demand are already showing. Mortgage applications surged last week to a three-year high, with both purchase and refinance activity climbing, according to the Mortgage Bankers Association.
Even with rates falling, affordability may not improve dramatically, analysts warn. Lisa Sturtevant, chief economist at Bright MLS, said that national home prices have continued rising since spring, limiting relief for buyers.
“For real affordability gains, we need to see both a drop in mortgage rates and much slower price growth, or even home price declines,” she explained. Still, she noted that crossing below the 6.5% threshold could have a powerful psychological effect, luring more buyers back into the market.
Looking ahead, some analysts believe the market is already pricing in a September Fed rate cut. But mortgage rates remain unpredictable.
“It’s nearly impossible to predict exactly how rates will fare out in the future – mortgage rates don’t always react predictably to Fed decisions,” said Erik Schmitt of Chase Home Lending. He pointed out that when the Fed began cutting interest rates last fall, mortgage rates surprisingly climbed instead.
For now, buyers are cautiously optimistic – but whether falling mortgage rates translate into lasting affordability gains depends on both the Fed’s next moves and whether home price growth finally slows.
Leo Cruz brings sharp insights into the world of politics, offering balanced reporting and analysis on the latest policies, elections, and global political events. With years of experience covering campaigns and interviewing world leaders, Leo ensures readers are always informed and engaged.
