U.S. Home Loan Interest Rates Hit Lowest Level Since May

According to data released by Freddie Mac on Thursday, the interest rate on the most common type of U.S. home loan has fallen for a ninth consecutive week, reaching its lowest level since May.

Declining Interest Rates

As of December 28, the interest rate on a 30-year fixed-rate mortgage averaged 6.61 percent, down from 6.67 percent the previous week. This continuous decline marks a significant drop of 1.18 percentage points since late October, when rates reached their highest level in 22 years.

Impact of the Federal Reserve

During the height of the COVID-19 pandemic, interest rates had plummeted to below 3 percent. However, in 2022, the Federal Reserve initiated an aggressive rate hiking campaign to combat inflation, causing rates to surge.

Recently, the Federal Reserve indicated that it has concluded its rate hikes and is likely to begin lowering them in 2024. This announcement has triggered a strong rally in bond markets, resulting in yields on the 10-year Treasury note (which sets mortgage rates) dropping below 4 percent from around 5 percent in late October.

With this positive trend, prospective homebuyers can take advantage of the current low interest rates to secure affordable mortgage options.