Mortgage rates have hit another 2025 low — but experts say consumers should still proceed cautiously.
The 30-year, fixed-rate mortgage averaged 6.5% in the week ended Thursday, according to data from Freddie Mac. That's down from last week's average of 6.56%, but it's higher than a year ago, when the average was 6.35%.
A similar trend manifested in daily mortgage rates — more volatile measures than the average reading. On Wednesday, the daily 30-year, fixed-rate mortgage sank to 6.49%, an 11-month low.
The 15-year, fixed-rate mortgage also declined on both a weekly and daily basis as of Thursday. The loan averaged 5.6%, according to Freddie Mac. As of Wednesday, daily measures of the 15-year rate had slipped to 5.85%.
Consumer optimism grows, but not activity
The downward trend in mortgage rates is "increasing optimism for new buyers and current owners alike," according to Sam Khater, Freddie Mac's chief economist.
But that optimism hasn't clearly translated into borrower activity. Mortgage application activity fell for the third consecutive week ending Aug. 29, data from the Mortgage Bankers Association showed.
"Purchase activity has been mostly higher in recent weeks but dropped modestly last week as affordability challenges continue to pose a hurdle for some prospective buyers," Bob Broeksmit, the association's president and CEO, said in a statement.
In other words, consumers need something to give: Home prices need to fall significantly, or mortgage rates need to decrease even more, before demand can pick up.
Don't expect any substantial rate drops before the end of the year
Though some have suggested that a Federal Reserve interest rate cut could spur that kind of mortgage rate decline, lenders aren't convinced. Jeffrey Ruben, president of WSFS Mortgage, for example, thinks mortgage rates are likely to stay within a narrow range through the end of this year.
"I don't think we're going to see a substantial drop," he told Homes.com.
"The question is whether the bond market is believing that the short-term cuts that the Fed effects is really predictive of where we are on a longer-term view of the economy," he added. "The way the 10-year [bond market] has been behaving, there is still real concern about inflation in the future. That's why they're demanding a higher rate for a longer term."
Essentially, the Fed controls short-term, overnight rates. But long-term rates, like the 30-year mortgage, are likely to stay higher for longer because markets are uncertain about the future of the economy.
Even in the case that a Fed rate cut does spur some movement in the mortgage market, that likely won't come until there's more certainty about the central bank's plans, according to Anthony Kellum, president and CEO of Kellum Mortgage.
"The market feels like it’s in a holding pattern right now," Kellum said in a Bankrate survey. "With a Fed meeting later this month, I expect most lenders and investors will stay the course until they get clearer guidance. In short, unless a major surprise surfaces in the data, I believe rates will hold steady as the market continues to look for stronger confirmation of the Fed’s next move."
In short, mortgage rates are moving down, but whether that trend continues is unclear. For borrowers looking to make a move today, though, Ruben said banking on refinancing when rates come down is risky.
"The key is being able to crunch the numbers and afford it today and not count on or anticipate or build a plan around a lower rate in the future," he said. "If it comes, that's just going to be that much better, but you shouldn't purchase a home with that kind of anticipation. I think that's a mistake."