Real Estate

Will Mortgage Rates Keep Falling? Homebuyers See a Glimmer of Hope as Rates Dip to Lowest in a Year

Mortgage rates fell for the fourth week, hitting a 1-year low, potentially boosting home sales.

byAndres Castro

October 31, 2025, 11:06 AM

A 3D rendering depicts a rising bar graph illustrating real estate growth.

A vibrant 3D rendering of a real estate growth chart illustrates the upward trajectory of property values. By MDL.

Executive Summary

The average 30-year U.S. mortgage rate has declined for the fourth consecutive week, reaching 6.17%, its lowest point in over a year.

This drop has positively impacted the housing market, leading to an acceleration in existing home sales and a 7.1% increase in mortgage applications, including a 9% rise in refinance loans.

Mortgage rates are influenced by Federal Reserve policy and bond market expectations; while the Fed recently cut its key interest rate, future cuts are uncertain, and inflation concerns, potentially exacerbated by Trump administration tariffs, could push rates upward.

The Trajectory So Far

Mortgage rates generally track the 10-year Treasury yield and are currently being influenced by the Federal Reserve’s recent interest rate cuts aimed at supporting a slowing U.S. labor market. However, the future direction of rates remains uncertain as the Fed has cautioned against guaranteed further cuts, and potential inflation, possibly exacerbated by the Trump administration’s expanding use of tariffs, could push bond yields and mortgage rates higher as investors demand greater returns.

Assessing Risk and Value

The recent decline in 30-year mortgage rates to a one-year low offers a potential boost to the housing market, suggesting increased homebuyer demand and attractive refinancing opportunities, which could benefit real estate and related sectors. However, investors face ongoing uncertainty as future Federal Reserve rate cuts are not guaranteed, and potential inflationary pressures, possibly exacerbated by Trump’s tariff policies, could reverse this trend by pushing Treasury yields and mortgage rates higher. Moreover, the broad impact on refinancing volumes may be limited, as a significant portion of existing homeowners already hold lower rates, requiring further substantial rate drops for a widespread refinancing wave.

Expert Predictions and Forecasts

Lower mortgage rates are expected to boost homebuyers’ purchasing power and increase refinancing opportunities, as evidenced by recent increases in existing home sales and mortgage applications.

Despite recent declines, current mortgage rates are not low enough to incentivize a large proportion of existing homeowners to refinance, as most already have rates below 6%.

The future direction of mortgage rates remains uncertain, with potential for upward movement due to Federal Reserve Chair Jerome Powell’s caution on future rate cuts, possible inflation from Trump’s tariffs, and rising 10-year Treasury yields.

The average rate on a 30-year U.S. mortgage has declined for the fourth consecutive week, reaching its lowest point in more than a year. This drop, from 6.19% to 6.17%, was reported by the Federal Home Loan Mortgage Corporation, or Freddie Mac, on Thursday. Lower mortgage rates are expected to enhance homebuyers’ purchasing power and offer attractive refinancing opportunities for existing homeowners.

Mortgage Rate Details

The latest average 30-year fixed-rate mortgage stands at 6.17%, down from 6.19% the previous week. A year ago, the average rate was significantly higher at 6.72%. The last time rates were lower was on October 3, 2024, when they averaged 6.12%.

Borrowing costs for 15-year fixed-rate mortgages, often favored by homeowners looking to refinance, also eased. The average rate decreased from 5.44% to 5.41% this week, compared to 5.99% a year ago, according to Freddie Mac.

Impact on the Housing Market

The housing market has experienced a downturn since mortgage rates began climbing from historic lows in September 2022, consistently remaining above 6%. Last year saw sales of previously occupied U.S. homes fall to their lowest level in nearly three decades.

However, recent rate declines have shown some positive effects. Sales of existing homes accelerated last month, reaching their fastest pace since February. Mortgage applications, which encompass both home purchases and refinances, increased by 7.1% last week from the prior week, according to the Mortgage Bankers Association (MBA).

Refinancing Trends

Applications for mortgage refinance loans saw a notable rise of 9% last week, more than doubling compared to the same week last year. Despite this surge, a broader segment of homeowners might not find current rates sufficiently appealing for refinancing.

Data from Realtor.com indicates that approximately 80% of U.S. homes with a mortgage currently hold a rate below 6%, with 53% having a rate below 4%. This suggests that rates would need to fall further to entice a larger proportion of homeowners to refinance.

Factors Influencing Rates

Mortgage rates are influenced by a complex interplay of factors, including the Federal Reserve’s interest rate policy decisions and bond market expectations regarding the economy and inflation. They typically track the trajectory of the 10-year Treasury yield, which lenders use as a benchmark for pricing home loans.

Rates began their recent decline in July, preceding the Federal Reserve’s decision in September to cut its main interest rate for the first time in a year, driven by concerns about the U.S. labor market. The Fed again lowered its key interest rate this week to support the slowing job market.

However, Federal Reserve Chair Jerome Powell cautioned that further rate cuts in December are “not a foregone conclusion,” which led the 10-year Treasury yield to climb to roughly 4.09% by Thursday’s close. The Fed might also temper future rate cuts if inflation escalates, potentially exacerbated by the Trump administration’s expanding use of tariffs, as lower rates can contribute to inflation.

Bond investors demand higher returns when inflation is elevated, which could translate into increased yields on the 10-year Treasury note, ultimately pushing mortgage rates upward. It is important to note that the central bank does not directly set mortgage rates, and its short-term rate cuts do not guarantee a corresponding decline in home loan rates, as evidenced by mortgage rates marching higher last fall after an initial Fed rate cut.

Market Outlook

While the recent dip in mortgage rates has provided some relief and stimulated market activity, the future direction remains subject to economic indicators and Federal Reserve policy. The interplay of inflation concerns, Treasury yields, and the Fed’s cautious stance will continue to shape borrowing costs for homebuyers and homeowners.