Mortgage rates dip to lowest level since early 2023 after Fed rate cut

Mortgage rates declined to their lowest level since February 2023 after the Federal Reserve instituted a significant interest rate cut.

In the past week, the standard 30-year, fixed-rate mortgage averaged 6.09%, according to data released by Freddie Mac on Thursday, compared to 6.35% the week of Sept. 5 and a peak of 7.76% in November 2023.

This marks the lowest rate since February 2023 and is likely due to the Fed's interest rate cut implemented Wednesday.

Mortgage rates reached historic lows in 2020 and 2021, touching 2.65% in early January 2021, before skyrocketing through 2022 and 2023, hitting a peak of 7.76% in November 2023.

The new figures will likely spur home buying, which slumped in August.

“Home sales were disappointing again in August, but the recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months,” said National Association of Realtors Chief Economist Lawrence Yun on Thursday. “The home-buying process, from the initial search to getting the house keys, typically takes several months.”

Existing home sales declined 2.5% in August from the previous month to a seasonally adjusted annual rate of 3.86 million.

The NAR also found that median existing-home sales prices had grown in August for the 14th consecutive year.

The Fed's monetary policy committee cut its interest rate target by half a percentage point, which is twice as large as a typical revision.

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The Fed cut rates because inflation has been falling toward its target, and there are signs that the labor market could be weakening. Rate cuts are meant to boost business and consumer spending and increase commerce, which can lift stock prices. In July, the S&P 500 saw its best and worst days since 2022, including a sudden crash in Japanese stocks that quickly recovered.

Recent economic data has stock and bond markets disagreeing on whether or not economic data shows an overheating economy cooling down, or the opening pangs of a recession.