Would-be homebuyers are seeing lower mortgage rates
Mortgage rates just dipped to a two-and-a-half year low—sparking hope that the slumbering real estate market will get a much-needed jolt that also benefits the broader economy.
Housing affordability and higher rates have been major issues for would-be homebuyers and sellers , but that could be changing. For the first time since February 2023, the average 30-year fixed mortgage rate stands at 6.43% (see the chart)—down sharply from its recent high of more than 8%.
One reason: Weaker-than-expected conditions in the labor market have boosted expectations that the Federal Reserve Board will cut interest rates this week—helping push down borrowing costs on mortgages and other types of debt.
U.S. Home Mortgage 30-Year Fixed National Average
Bankrate, data as of 09/15/2025.
This widespread agreement among investors that the Fed will cut rates is benefiting the mortgage market. That’s because mortgage rates typically equal the yield on the 10-year Treasury note plus additional percentage points reflecting the level of uncertainty about the future direction of interest rates. The higher the uncertainty, the higher the “spread” between the 10-year yield and the 30-year fixed rate.
After hitting a high of 350 basis points in March 2023, that spread is now down to just 240 basis points and moving closer to its “pre-Covid” average of 160 basis points—thanks in part to the growing clarity about the likely path of interest rates going forward.
Uncertainty over interest rates could fall even further if the Fed offers further insight this week. That could lower mortgage rates by about 80 basis points, bringing spreads back to pre-Covid levels—and in turn support the economy by driving more home buying and refinancing, lifting consumer confidence, and improving labor mobility.