US mortgage rates drop to two-year low ahead of Fed rate cut

U.S. mortgage rates declined last week to the lowest level since September 2022 in anticipation of Federal Reserve interest-rate cuts, stoking an influx of applications for home purchases and refinancing.

The contract rate on a 30-year fixed mortgage dropped 14 basis points to 6.15% in the week ended Friday, Mortgage Bankers Association data showed Wednesday. The rate has fallen seven straight weeks, the longest such stretch since 2018-2019.

The average contract rate on a 15-year mortgage slid 29 basis points to 5.42%, also the lowest in two years. Adjustable-rate mortgages dropped to 5.66%.

Mortgage rates track U.S. government securities, and the yield on the 10-year Treasury note is hovering near the lowest level since mid-2023 ahead of an expected series of interest-rate cuts by the Fed. Central bankers are widely predicted to start easing monetary policy later on Wednesday, but economists and investors are split as to how big the reduction will be.

Cheaper borrowing costs helped drive a 5.4% advance in the group’s home-purchase applications index to a three-month high. The refinancing gauge surged more than 24% to the highest level since April 2022.

The extended period of declining mortgage rates may help to further boost homebuilder confidence, which increased in September for the first time in six months. Lower borrowing costs could also help bring more prospective buyers and sellers back into a resale market constrained by a limited number of homes for sale.

The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the U.S.