Mortgage rates declined last week to their lowest level of 2025, according to a Mortgage Bankers Association survey released Wednesday morning, providing some relief for prospective home buyers beleaguered by years of high rates, though the impetus for cheaper mortgages is not exactly welcome news for consumers.
Trump and his top economic official Scott Bessent have shifted their focus to mortgage rates and … [+] bond yields as the stock market wobbles.
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Key Facts
The average 30-year mortgage rate in the U.S. was 6.73% for loans of $806,500 or less in the week ending last Friday, according to the MBA.
That’s the lowest reading since early December, declining about 30 basis points from the more than 7% mortgage rates that clouded much of January.
The decline came amid “souring consumer sentiment regarding the economy and increasing uncertainty over the impact of new tariffs,” according to Joel Kan, the MBA’s vice president and deputy chief economist.
Why Are Mortgage Rates Going Down?
The mortgage rate move came as yields fell for the highly correlated 10-year U.S. government bonds. Yields for 10-year Treasury notes declined about 70 basis points from their January peak of 4.9% to 4.2% at Friday’s market close. Treasury yields, which equate to the annual interest payments investors require to hold the federal government’s debt, are in turn correlated with market expectations for Federal Reserve interest rate cuts. Lower yields are in part due to optimism about the Trump administration improving the U.S.’ fiscal picture, but the latest downward turn has come as investors flooded out of stocks and piled into safer bonds.
Trump Shifts His Focus From The Stock Market To Lower Rates
As the stock market wobbles as Wall Street wavers on Trump’s tariffs, Trump and his top officials have shifted their attention to the bond market. Over the last two weeks, the S&P 500 benchmark stock index has sunk 6% as yields for the 10-year Treasury dipped from 4.5% to 4.2% (lower yields signal more valuable bonds). Trump emphasized his desire for lower borrowing costs in his Tuesday address to Congress, saying he wants to “bring down mortgage rates” and celebrating the “beautiful drop, big beautiful drop” in “interest rates” Tuesday, though the 10-year yield actually increased slightly in Tuesday trading. “One of the biggest wins for the American people is, since Election Day, and since inauguration, mortgage rates have come down dramatically,” declared Treasury Secretary Scott Bessent in a Tuesday interview. The MBA’s final pre-election survey revealed an average 30-year mortgage rate of 6.81%, just eight basis points above where they now stand, and its final pre-inauguration poll found a 7.02% mortgage rate. But mortgage rates are still far pricier than they were in September, when they hit a two-year low of 6.1%.
Key Background
Mortgage rates peaked at a 23-year high of nearly 8% in late 2023, before pulling back slightly as the Fed pivoted away from further rate increases. Mortgage rates are still nearly twice as expensive as they were five years ago, before the COVID-19 pandemic upended the picture for borrowers, even as average home prices hover near a record high. Significant decreases in mortgage rates often come in times of significant economic distress as the Fed slashes its target rate to stimulate the economy.
Further Reading
