ALEX VEIGA Associated Press

Elevated mortgage rates have kept the U.S. housing market in a slump since early 2022, when rates began climbing from pandemic lows. MCLEAN, Va. — The average rate on a 30-year U.S. mortgage fell again this week, extending a recent trend that should give prospective homebuyers more purchasing power. The long-term rate eased to 6.5% from 6.56% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.35%. Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell. The average rate slipped to 5.6% from 5.69% last week. A year ago, it was 5.47%, Freddie Mac said. 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. Rates have been mostly declining since late July amid growing expectations that the Fed will cut its benchmark short-term interest rate at the central bank’s meeting of policymakers later this month. A similar trend happened in the leadup to September last year, when the Fed cut its rate in for the first time in more than four years. At that time, the average rate on a 30-year mortgage got down to a 2-year low of 6.08%, but soon after climbed again, reaching above 7% by mid-January. While the Fed doesn’t set mortgage rates, its actions can influence bond investors’ appetite for long-term U.S. government bonds, like 10-year Treasury notes. Lenders use the yield on 10-year Treasurys as a guide to pricing home loans. The Fed has kept its main interest rate on hold this year because it’s been more worried about inflation potentially worsening because of President Donald Trump’s tariffs than about the job market. But in a high-profile speech last month, Federal Reserve Chair Jerome Powell signaled the central bank may cut rates in coming months amid concerns about weaker job gains following a grim July jobs report, which included massive downward revisions for June and May, The government’s August job market snapshot is due out Friday. Ahead of it, the yield on the 10-year Treasury fell to 4.18% from 4.22% late Wednesday. “Historically, a weaker or softer-than-expected jobs report fuels optimism for Federal Reserve rate cuts and can lower bond yields, thereby nudging mortgage rates downward,” said Hannah Jones, senior economic research analyst at Realtor.com. “Conversely, a robust job report may reinforce inflation concerns and elevate Treasury yields, putting upward pressure on mortgage rates. This setup underscores the potential for increased mortgage rate volatility ahead.” The housing market has been in a slump since 2022, when mortgage rates began climbing from historic lows. Sales have remained sluggish so far this year as the average rate on a 30-year mortgage has mostly hovered above 6.5%. The average rate is now at its lowest level since Oct. 17, when it was 6.44%. If the trend continues, homebuyers will benefit from more affordable financing. But lower mortgage rates could also bring in more buyers, making the market more competitive. Economists generally expect the average rate on a 30-year mortgage to remain near the mid-6% range this year. Copyright 2025 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.