Homebuyers and existing borrowers in the market to refinance are finally getting some long-awaited mortgage-rate relief.
The average 30-year, fixed-rate mortgage fell to 6.50%—the lowest level in 11 months, according to Freddie Mac’s latest Primary Mortgage Market Survey released Sept. 5.
The benchmark rate dropped six basis points from 6.56% the week prior, Freddie Mac reported. That’s a significant improvement from early 2025 highs. The 15-year, fixed-rate mortgage also declined, averaging 5.60% compared to 5.69% over the same period.
“Mortgage rates continue to trend down, increasing optimism for new buyers and current owners alike,” said Sam Khater, Freddie Mac’s chief economist.
“As rates continue to drop, the number of homeowners who have the opportunity to refinance is expanding. In fact, the share of market mortgage applications that were for a refinance reached nearly 47%, the highest since October,” Khater said.
Struggling job market drives mortgage rate declines
The drops in mortgage rates come amid news that the job market has cooled considerably.
The U.S. economy added just 22,000 jobs in August, far short of the median forecast of 75,000 jobs, the U.S. Bureau of Labor Statistics (BLS) reported Friday. The unemployment rate ticked up to 4.3% to its highest level since 2021.
However, Wednesday’s Job Openings and Labor Turnover Survey (JOLTS) showed that job openings fell to 7.18 million in July—the lowest level in nearly a year and below the 7.2 million unemployed workers looking for jobs. This marks the first time in more than four years that the number of unemployed workers exceeded job openings.
Market reaction to the news was swift. The 10-year Treasury dropped seven basis points to 4.205% following the JOLTS release.
However, by Friday afternoon, the 10-year Treasury tumbled another 13 basis points to 4.076%. The bond rally led to mortgage rate declines, as rates typically track movements in longer-term Treasury yields.
The average 30-year fixed mortgage rate fell to 6.29% by Friday, a level not seen since fall 2024, according to data from Mortgage News Daily.
What’s ahead for mortgage rates, housing market
All combined, weaker employment data makes a stronger case for the Fed to cut rates at its next meeting in mid-September. And that might indirectly spur movement in mortgage rates.
“Historically, a weaker or softer-than-expected jobs report fuels optimism for Federal Reserve rate cuts and can lower bond yields, thereby nudging mortgage rates downward,” said Hannah Jones, senior economic research analyst at Realtor.com.
“Conversely, a robust job report may reinforce inflation concerns and elevate Treasury yields, putting upward pressure on mortgage rates. This setup underscores the potential for increased mortgage rate volatility ahead.”
Meanwhile, Kara Ng, senior economist at Zillow Home Loans, offered a measured outlook for the remainder of 2025.
“Additional downward pressure came from Federal Reserve Governor Christopher Waller’s comments advocating for multiple rate cuts. This move aligns rates closer to Zillow’s prediction of a mid-6% range by year-end,” Ng said, suggesting limited room for further improvement.
Despite modest rate relief, buyers still face affordability hurdles. But there are some silver linings, Ng noted.
“For buyers who can navigate today’s affordability constraints, the market has become more favorable,” Ng said. “There’s less competition, more inventory, and greater negotiating power. Zillow’s market heat index shows 27 major metro areas have shifted into neutral or buyer’s market territory—three more than last month—and a clear break from the seller-dominated markets of recent years.”
The shift is evident in pricing dynamics, Ng noted, with 27.4% of active listings seeing price reductions—a new seven-year high in Zillow’s data.
Housing experts expect the market’s response to lower rates to be fairly muted thanks to elevated home prices, limited inventory in many markets and broader affordability hurdles like higher home insurance premiums and property taxes.
