Average US long-term mortgage rate hits the lowest point in more than 3 years

U.S. mortgage rates have fallen to their lowest level in over three years, offering a potential boost to the long-stagnant housing market.

The benchmark 30-year fixed mortgage rate dropped to 6.06% this week, down from 6.16% last week and significantly lower than the 7.04% rate recorded a year ago, according to data released Thursday by mortgage buyer Freddie Mac. The current rate hasn’t been this low since September 15, 2022, when it stood at 6.02%.

Fifteen-year fixed-rate mortgages, commonly used for refinancing, also declined this week to 5.38% from 5.46%. By comparison, this rate was 6.27% during the same period last year.

The declining rates represent welcome news for potential homebuyers who have faced considerable challenges in recent years. The housing market has remained in a prolonged slump, with soaring prices and elevated mortgage rates creating significant barriers to entry for many aspiring homeowners. Economic uncertainty and job market concerns have further dampened buyer enthusiasm.

Mortgage rates began their downward trajectory in July, anticipating the Federal Reserve’s rate cuts that eventually began in September and continued last month. While the Fed doesn’t directly set mortgage rates, its actions influence investor behavior in ways that ultimately affect borrowing costs for homebuyers.

When the Fed cuts its short-term rate, it signals potential lower inflation or slower economic growth ahead. This typically drives investors toward U.S. government bonds, lowering yields on long-term Treasurys and subsequently pushing down mortgage rates.

The rate reductions have already shown some positive impact on the housing market. Sales of previously occupied U.S. homes increased on a monthly basis during the final four months of 2025. However, the overall market remains significantly depressed, with home sales stuck at a 30-year low last year, marking the fourth consecutive year of housing market downturn.

For those who can afford to buy at current rates, the lower borrowing costs provide tangible benefits. According to real estate brokerage Redfin, the median U.S. monthly housing payment fell to $2,413 in the four weeks ending January 11. This represents a 5.5% decrease from the same period a year earlier and approaches the lowest level in two years.

The rate decline comes in the wake of President Donald Trump’s recent announcement that the federal government would purchase $200 billion in mortgage bonds to help reduce mortgage rates further.

Refinancing activity has surged in response to the more favorable rate environment. The Mortgage Bankers Association reported that applications for mortgage refinancing soared 40% last week compared to the previous week, accounting for 60% of all home loan applications. Applications for home purchase loans also increased by 16%.

“With mortgage rates much lower than a year ago and edging closer to 6%, MBA expects strong interest from homeowners seeking a refinance and would-be buyers stepping off the sidelines,” said MBA CEO Bob Broeksmit.

Economic forecasts generally anticipate further easing of mortgage rates throughout the year. However, most projections indicate that the average rate on a 30-year mortgage will remain above 6%, which is still approximately twice the rate from six years ago.

Despite the positive trend, a significant obstacle remains for many existing homeowners. According to Realtor.com, nearly 69% of U.S. homes with outstanding mortgages have fixed rates of 5% or lower, and slightly more than half have rates at or below 4%. For these homeowners, current rates would need to drop considerably further before refinancing becomes an attractive option.

The continued decline in mortgage rates could prove pivotal for the housing market in 2024, potentially revitalizing a sector that has struggled for years under the weight of high borrowing costs and limited inventory.