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Mortgage Rates End 2025 at the Lowest Level of the Year – Eye On Housing

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Long-term mortgage rates have been declining since mid- 2025 and ended the year at their lowest level since September 2024. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.19% in December, 5 basis points (bps) lower than November. Meanwhile, the 15-year rate declined 3 bps to 5.48%. Compared to a year ago, the 30-year rate is lower by about half a percentage point, or 53 basis points (bps). The 15-year rate is also lower by 45 bps.

The 10-year Treasury yield, a key benchmark for long-term borrowing, averaged 4.12% in December – a modest increase of 2 bps from the previous month. Given forward-looking markets, the 10-year Treasury yield declined during the week preceding the Federal Reserve’s third rate cut of the year. However, compared to the prior month, yields ended slightly higher, rising 2 bps, as labor market data released shortly thereafter pointed to slowing job gains and rising unemployment rate.

Falling lower mortgage rates have started to translate into gains as existing home sales edged up slightly in November. However, this increase remains limited as mortgage rates above 6% are still considered elevated. Nonetheless, as financing costs continue decline, more households are likely to reenter the housing market. An NAHB analysis shows that a 25 bps reduction in the 30-year mortgage rate, from 6.25% to 6.00%, could bring approximately 1.1 million additional households back into the buyer pool.

NAHB expects the 30-year mortgage rate to average 6.17% in 2026 and would reach 6% by 2027.



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Top Posts – Lower Mortgage Rates, Better Affordability – Eye On Housing

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As housing affordability remains a critical challenge across the country, mortgage rates continue to play a central role in shaping homebuying power. Mortgage rates stayed elevated throughout 2023 and early 2024. Recent data, however, shows a modest decline in mortgage rates. Even slight declines can have a significant impact on housing affordability, pricing more households back into the market. New NAHB Priced-Out Estimates show how home price increases affect housing affordability in 2025. This post presents details regarding how interest rates affect the number of households that can afford a median priced new home.

At the beginning of 2025, with the average 30-year fixed mortgage rate at 7%, around 31.5 million households could afford a median-priced home at $459,826. This requires a household income of $147,433 by the front-end underwriting standards[1]. In contrast, if the average mortgage rates had remained at the recent peak of 7.62% in October 2023, only 28.7 million households would have qualified. This 62-basis point decline has effectively priced 2.8 million additional households into the market, expanding homeownership opportunities.

The table below shows how affordability changes with each 25 basis-point increase in interest rates, from 3.75% to 8.25% for a median-priced home at $459,826. The minimum required income with a 3.75% mortgage rate is $110,270. In contrast, a mortgage rate of 8.25%, increases the required income to $163,068, pushing millions of households out of the market.

As rates climb higher, the priced-out effect diminishes. When interest rates increase from 6.5% to 6.75%, around 1.13 million households are priced out of the market, unable to meet the higher income threshold required to afford the increased monthly payments. However, an increase from 7.75% to 8% would squeeze about 850,000 households out of the market.

This exemplifies that when interest rates are relatively low, a 25 basis-point increase has a much larger impact. It is because it affects a broader portion of households in the middle of the income distribution. For example, if the mortgage interest rate decreases from 5.25% to 5%, around 1.5 million more households will qualify the mortgage for the new homes at the median price of $459,826. This indicates lower interest rates can unlock homeownership opportunities for a substantial number of households.

[1] . The sum of monthly payment, including the principal amount, loan interest, property tax, homeowners’ property and private mortgage insurance premiums (PITI), is no more than 28 percent of monthly gross household income.



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Mortgage Rates Continue to Trend Lower in November – Eye On Housing

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The average mortgage rate in November continued to trend lower to its lowest level in over a year. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.24% in November, 2 basis points (bps) lower than in October. Meanwhile, the 15-year rate increased 3 bps to 5.51%. Both the 30-year and 15-year rates remain lower than a year ago, dropping by 57 bps and 52 bps year-over-year, respectively.

The 10-year Treasury yield, a key benchmark for long-term borrowing, averaged 4.09% in November– a 3-basis point increase from the previous month. The spread between the 30-year fixed mortgage rate and the 10-year Treasury remains somewhat elevated at 215 basis points, well above the roughly 150-180 basis points seen in a stable market. While the spread has narrowed from the wide gap in 2023, it continues to reflect ongoing market uncertainty, keeping mortgage rates higher than their historical relationship to 10-year Treasury yields.

Falling mortgage rates have shown some impact on housing activity. Mortgage application activity continues to strengthen, led by increases in adjustable-rate mortgages and refinancing applications. Additionally, existing home sales rose to an eight-month high in October. There is no data available for new home sales in October due to the government shutdown.



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Lowest Mortgage Rates in Over a Year in October  – Eye On Housing

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Average mortgage rates in October trended downward to the lowest rates in over a year. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.25% in October, 10 basis points (bps) lower than September. Meanwhile, the 15-year rate declined just 1 bp to 5.49%. Both the 30-year and 15-year rates remain lower than a year ago, dropping by 17 bps and 11 bps year-over-year, respectively.  

The 10-year Treasury yield, a key benchmark for long-term borrowing, averaged 4.09% in October – a 5-basis point decrease from the previous month. Markets priced in rate cuts from the Fed at the start of the month, resulting in relatively unchanged rates following the announcement of a 25 bps cut to the federal funds rate on October 29th. 

Falling mortgage rates have shown some small impacts on housing activity. According to the latest Mortgage Bankers Association (MBA) report, mortgage application activity strengthened, with refinancing applications rising and purchase applications also increasing. Additionally, existing home sales rose to a seven-month high in September. There is no data available for new home sales in September due to the government shutdown. 

Looking forward, the industry faces a bifurcated market characterized by a weakening job market and elevated inflation. Additionally, there are wildcard factors such as the upcoming Supreme Court case regarding the legality of recent tariffs and lack of economic data. As a result, the vote at the December Fed meeting will be difficult to predict.  

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Mortgage Applications Tick Up in July as Rates Ease Slightly

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Mortgage application activity picked up in July as interest rates eased modestly. The Mortgage Bankers Association’s (MBA) Market Composite Index, which tracks mortgage application volume, rose 2.4% from June on a seasonally adjusted basis. Compared to July 2024, total applications were up 24.5%.

The average contract rate for 30-year fixed mortgages edged down by 4 basis points to 6.8%. While refinancing increased by 7.4%, purchase applications slipped 1.2% as high home prices and mortgage rates continued to keep homebuyers on the sideline. Year-over-year, the 30-year rate was 6 basis points lower, with purchase and refinance applications up 19.6% and 32.2%, respectively.

Loan sizes continued to trend downward for the third consecutive month. The average loan amount across all loan types declined 1.7% to $376,500. Purchase loan sizes fell 2.5% to $428,800, while refinance loans increased 3.0% to $299,300. Adjustable-rate mortgage (ARM) loan sizes saw the largest decline among all loan types, falling 6.6% to $957,500 from $1.03 million.   

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Mortgage Rates Decline in July; Treasury Yields Rise Mid-Month

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Average mortgage rates dipped in July, according to Freddie Mac. The average 30-year fixed-rate mortgage was 6.72%, 10 basis points (bps) lower than June. Meanwhile, the 15-year rate declined 9 bps to average at 5.86%. Compared to a year ago, the 30-year rate is down 13 basis points (bps), and the 15-year rate is 28 bps lower.

The 10-year Treasury yield, a key benchmark for long-term borrowing, averaged 4.37% in July – a 6 bps decline from the previous month. Yields began the month lower but reversed course and rose steadily as investor expectations solidified that the Federal Reserve would maintain its current policy stance. These expectations were driven by economic data showing an uptick in inflation while the economy and labor market remained solid.

On July 30, the Federal Open Market Committee (FOMC) solidified market expectations by voting to keep the federal funds rate unchanged at 4.25% to 4.50%. However, just days later, the July employment report released by the Bureau of Labor Statistics on Friday, August 1, showed downward revisions to job gains in May and June. In response, yields fell to around 4.2% as investors perceived an increased likelihood of a rate cut at the Fed’s next meeting in September.

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Mortgage Applications Picked Up in June as Rates Eased

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Mortgage application activity picked up in June, supported by a slight decline in interest rates. The Mortgage Bankers Association’s (MBA) Market Composite Index, which tracks mortgage application volume, rose 5.4% from May on a seasonally adjusted basis. Compared to June 2024, total applications were up 21.1%.

The average contract rate for 30-year fixed mortgages edged down by 4 basis points to 6.86%. In response, purchase applications increased 3.7% month-over-month, while refinance activity climbed 6.5%. On a year-over-year basis, the 30-year rate was 12 basis points lower, with purchase and refinance applications up 15.2% and 30.3%, respectively.

Loan sizes continued to trend lower. The average loan amount across all loan types declined 2% to $383,000. Purchase loans edged down 0.9% to $439,800, and refinance loans decreased 1.8% to $290,500. Adjustable-rate mortgage (ARM) loan sizes dropped 3.1% to $1.03 million. 

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Mortgage Rates Hold Steady Despite Modest Uptick in Treasury Yield

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Average mortgage rates were flat in June, according to Freddie Mac. The average 30-year fixed-rate mortgage held at 6.82%, while the 15-year stayed at 5.95%. Compared to a year ago, the 30-year rate is down 10 basis points (bps), and the 15-year rate is 24 bps lower.

The 10-year Treasury yield, a benchmark for long-term borrowing, averaged 4.43% in June – a marginal increase of 5 bps from the previous month. However, the most recent weekly yield saw a small decrease following Federal Reserve Chair Jerome Powell’s congressional testimony, where he noted the possibility of a rate cut being “sooner rather than later” if inflation remains contained. Nonetheless, he reiterated the Fed’s “wait and see” stance, citing ongoing uncertainty around how changes in trade, immigration, fiscal, and regulatory policies will affect the economy.

Last week, the Federal Open Market Committee (FOMC) continued its pause on rate cuts, keeping the federal funds rate unchanged at 4.25% to 4.5%. The updated dot plot continues to signal a cumulative rate cut of 50 bps by the end of 2025. However, the latest Summary of Economic Projections revised the median 2025 GDP forecast down from 1.7% to 1.4%. Forecasts for unemployment (4.4% to 4.5%), PCE inflation (2.7% to 3.0%), and core PCE inflation (2.8% to 3.1%) were all revised upward.

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Elevated Rates, Challenging Affordability Conditions Put a Damper on New Home Sales

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Elevated interest rates and economic uncertainty sent more home buyers to the sidelines in May as housing affordability conditions remain challenging.

Sales of newly built single-family homes declined 13.7% in May, falling back to a seasonally adjusted annual rate of 623,000 according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This was the slowest pace since October of last year, as mortgage rates averaged 6.83% in May. Sales were particularly slow in the South, with the pace of sales down 21% in May.

The slowing of the housing market has occurred despite the growing use of of builder sales incentives, including 37% of home builders reporting cutting prices in the June NAHB/Wells Fargo Housing Market Index survey.

On a year-to-date basis, new home sales are 3.2% lower thus far in 2025. As a result of slowing home sales conditions, inventory continues to rise, marking an elevated 9.8 months’ supply in May.

As estimated by NAHB, total months’ supply, defined as a combination of current new and resale single-family inventory, now stands at 5.2. This is the highest sales-adjusted inventory level since 2015 and will place downward pressure on housing construction starts in the months ahead.

A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the May reading of 623,000 units is the number of homes that would sell if this pace continued for the next 12 months.

New single-family home inventory continued to rise with 507,000 residences marketed for sale as of May. This is 1.4% higher than the previous month and 8.1% higher than a year ago. At the current sales pace, the months’ supply for new homes stands at 9.8 compared to 8.5 a year ago. Completed, ready-to-occupy new home inventory stood at 115,000 in May, up 29% compared to a year ago on a non-seasonally adjusted basis. However, this measure was higher at the end of 2024.

The median new home sale price in May was $426,600, compared to $414,300 a year ago. This measure reflects the fact that higher income borrowers face fewer budget constraints than lower income prospective home buyers. New home sales priced below $500,000 were down 15% in May of 2025 compared to the May 2024.

Regionally, on a year-to-date basis, new home sales are down 20.7% in the Northeast, 11.9% in the Midwest and 1.8% in the South. Sales are up 2.1% in the West.

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Treasury Yield Increase Drives Mortgage Rates Higher in May

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Mortgage rates continued their upward trend in May due to market volatility triggered by fiscal concerns and weaker U.S. Treasury demand. According to Freddie Mac, the average 30-year fixed-rate mortgage rose to 6.82% — a 9-basis-point (bps) increase from April. The 15-year fixed-rate mortgage increased by 5 bps to 5.95%.

The 10-year Treasury yield, a benchmark for mortgage rates, averaged 4.38% in May, with the most recent weekly yield surpassing 4.50%. Long-term treasury yields spiked following two events: first, a credit rating downgrade by Moody’s Ratings, and then, a tepid auction of the 20-year treasury. The weak demand for long-term government bonds necessitated a higher yield to attract investors.

At the core of the market unease is concern over the growing fiscal deficit that intensified as the new “One Big Beautiful Bill” threatens to further widen the federal deficit, which stood at $1.9 trillion as of January 2025. The combination of weakening fiscal credibility and poor auction performance suggests a possible upward repricing of long-term borrowing costs.

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