Mortgage Interest Rates
Average mortgage rates in September 2025 trended lower as the bond market priced in expectations of rate cuts by the Federal Reserve. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.35%, 24 basis points (bps) lower than in the previous month. Meanwhile, the 15-year rate declined 21 bps to 5.50%. Despite the recent drop, rates remain higher than they were a year ago.
How Much Will Rates Decline?
The 10-year Treasury yield, a key benchmark for long-term borrowing, averaged 4.14% in September — a 15 bps decrease from the previous month. Markets began pricing in rate cuts from the Fed at the start of the month, particularly after news that jobless claims rose while inflation remained modest. On September 17, the Federal Reserve announced a 25 bps cut to the federal funds rate, bringing the target range to 4.00%–4.25%.
Impact of Rate Declines on Housing
Falling mortgage rates have already shown an impact on housing activity. New single-family home sales in August jumped 20.5% from the previous month, although we believe that estimate will be revised lower. Furthermore, according to the latest Mortgage Bankers Association (MBA) report, mortgage application activity strengthened, with refinancing applications rising and purchase applications remaining solid.
However, faced with stubbornly high home prices and elevated interest rates, many would-be buyers continue to stay on the sidelines until housing affordability conditions improve.
