Housing News

Coming Down: Mortgage Rates Fall to Two-Year Lows

Homebuyers finally have something to celebrate: Mortgage rates fell to a two-year low.

Mortgage interest rates averaged 6.08% for 30-year, fixed-rate loans in the week ending Sept. 26, according to Freddie Mac.

This was down just slightly from the previous week when rates averaged 6.09%. But it is more than a full percentage point lower than the rates a year ago, when they averaged 7.31%, according to Freddie Mac.

This decline in rates has increased refinance activity and could spur more home sales.

“Given the downward trajectory of rates, refinance activity continues to pick up, creating opportunities for many homeowners to trim their monthly mortgage payment,” said Freddie Mac Chief Economist Sam Khater in a statement.

“Meanwhile, many looking to purchase a home are playing the waiting game to see if rates decrease further as additional economic data is released over the next several weeks,” he continued.

The mortgage rate cuts came after the U.S. Federal Reserve voted to decrease interest rates by half a percentage point. This was the Fed’s first rate decrease in four years.

And while mortgage rates are separate from the Fed’s rates, the two generally move in the same direction. If the Fed continues to aggressively cut its rates, mortgage rates may also come down.

Even at current rates, buyers and homeowners who refinance may be able to save.

Someone who purchased the typical home at this week’s rates might be able to pay nearly $316 per month less than if they bought the same home a year ago when rates were higher. That adds up to nearly $3,787 a year—and more than $113,600 over the life of a 30-year loan.

This assumes they put down 10% on a $429,990 home. That was the national median list price in August, according to the most recent Realtor.com data.