US Mortgage Rates Drop Below 7% for the First Time Since August

The average interest rate on the most popular U.S. home loan has fallen below 7% for the first time since August, as Treasury market yields sharply decrease following the Federal Reserve's indication of nearing policy rate cuts.

The average interest rate on the most popular U.S. home loan has dropped below 7% for the first time since August. This comes as Treasury market yields have sharply decreased following the Federal Reserve's indication that it is nearing cuts to its policy rate.

US Mortgage Rates Drop Below 7% for the First Time Since August | Latest Update

According to a Freddie Mac survey released on Thursday, the average contract rate on a 30-year fixed-rate mortgage fell to 6.95% this week from 7.03% in the prior week. The yield on the 10-year Treasury note serves as a benchmark to set home loan costs, and borrowing costs for home purchases had reached two-decade highs near 8% in October. Yields were already on the decline but further plummeted after the U.S. central bank left interest rates unchanged on Wednesday and Fed Chair Jerome Powell stated that its tightening cycle is likely over, with discussions on cutting rates coming "into view" given inflation has been falling faster than expected. The anticipation that the Fed will cut rates faster and sooner than previously thought caused the bond market to extend its rally, with U.S. benchmark 10-year yields on Thursday sinking to their lowest level since July. Two-year yields also fell to their lowest level since May. Daily average mortgage rates have fallen to 6.82%, their lowest level since May, according to Redfin (NASDAQ:RDFN), citing Mortgage News Daily data. This marks the first time daily rates have fallen below 7% since July. Mortgage payments are also at their lowest level since April, with the median U.S. mortgage payment at $2,503 as of the four weeks ending Dec. 10, down $233 from October's record high.

The decrease in the average interest rate on U.S. home loans is a result of the Federal Reserve signaling potential cuts to its policy rate, leading to a sharp drop in Treasury market yields. This has caused borrowing costs for home purchases to decrease, with daily average mortgage rates falling to their lowest levels in months.