The average rate on the U.S. 30-year fixed-rate mortgage dipped to 5.98% this week, its lowest level since September 2022, down from 6.01% the prior week, mortgage finance agency Freddie Mac said on Thursday. For comparison, the 30-year rate averaged 6.76% during the same period a year ago.
The recent decline in mortgage costs followed a fall in the benchmark 10-year U.S. Treasury yield. That move in the bond market came after a U.S. Supreme Court decision struck down a broad tariffs law that had been used by President Donald Trump for sweeping duties. In response, the president quickly implemented a 10% global tariff for 150 days to replace some of the emergency duties, and then raised that tariff rate to 15% over the weekend.
The 30-year fixed mortgage rate typically tracks the 10-year Treasury yield, and changes in investor demand for safe assets have influenced mortgage borrowing costs this week. Jiayi Xu, an economist at Realtor.com, said the legal developments prompted a flight to safety that pushed bond prices up and yields down, which helped mortgage rates settle around the 6% area. Xu cautioned, however, that because the decline in rates stemmed from market volatility rather than underlying economic indicators, stronger economic data would be necessary to confirm a sustained trend.
Separately, the administration ordered the Federal Housing Finance Agency - the regulator that oversees Freddie Mac and Fannie Mae - to buy $200 billion of bonds issued by the two government-sponsored enterprises to help lower mortgage costs. Despite that directive, the average rate on the 15-year fixed-rate mortgage rose to 5.44% this week from 5.35% in the prior week. The 15-year averaged 5.94% during the same period a year ago.
Supply remains the central limit on housing market recovery
Economists remain skeptical that large-scale purchases of mortgage-backed securities will meaningfully improve housing affordability on their own. Minutes from the Federal Reserve's January 27-28 policy meeting, released last week, recounted a briefing from a New York Fed official charged with implementing monetary policy. The minutes noted that the administration's plans to buy mortgage bonds had sparked "a notable decline in mortgage-backed securities yields relative to those on comparable-maturity Treasury yields." Yet the official observed that this decline was unlikely to trigger a material rise in mortgage refinancing activity because current mortgage rates are still substantially above the weighted average rate on outstanding mortgages.
Policy pressure to lower costs is politically salient. President Trump faces pressure to reduce consumer expenses, including housing costs, as he and other Republicans contend with a difficult effort to retain control of the U.S. Congress in this year’s mid-term elections.
Housing market participants and policymakers point to the limited supply of homes for sale, particularly entry-level properties, as a major drag on affordability. Inventories of previously owned homes remain well below pre-pandemic levels. Many homeowners currently hold mortgages with interest rates under 5%, creating a "rate-lock" that dampens turnover in the market. Although housing supply made gains last year, those improvements have stalled more recently. There have been reports of homeowners removing listings in response to falling prices.
House price measures reflect this uneven dynamic. The Federal Housing Finance Agency reported on Tuesday that house prices rose 1.8% in the 12 months through December, a slower pace than the 2.1% year-over-year increase recorded in November.
Economists and trade groups attribute part of the constraint on new housing construction to administration policies on trade and immigration. They say these policies have increased the costs of building materials and household appliances and have reduced the available labor supply, limiting builders' capacity to start new single-family projects. In addition, scarce building lots and state and local regulatory barriers have further constrained the industry's ability to expand supply.
Even so, the recent dip in the 30-year fixed mortgage rate could nudge activity in the market. Some potential sellers might be induced to list their properties, and some buyers who had held back could re-enter the market. Kara Ng, senior economist at Zillow, noted that buying power has risen by roughly $30,000 compared with a year ago and that mortgage rates falling below 6% could represent an important psychological threshold. Ng added that round numbers matter, and the headline of sub-6% rates might prompt sidelined buyers to revisit the housing market.
While market forces and administrative actions have exerted downward pressure on some mortgage costs this week, economists emphasize that broader, sustained improvements in housing affordability will depend on a significant expansion in inventory and the resolution of structural constraints limiting homebuilding and listings.