U.S. Mortgage Rates Drop Amid Fed Rate Cut Expectations

WASHINGTON (Reuters) – U.S. mortgage rates dropped this week on expectations that the Federal Reserve would start cutting interest rates next Wednesday, but are unlikely to boost the housing market due to elevated home prices.

The average rate on the popular 30-year fixed-rate mortgage fell to 6.20%, the lowest since February 2023, down from 6.35% last week, according to mortgage finance agency Freddie Mac. This compares to an average of 7.18% during the same period a year ago.

The average rate on the 15-year fixed-rate mortgage declined to 5.27% from 5.47% last week, compared to 6.51% a year ago. The U.S. central bank is expected to begin its easing cycle with a 25 basis points rate cut next week.

"But despite the improving mortgage rate environment, prospective buyers remain on the sidelines, negotiating high house prices and persistent supply shortages," said Sam Khater, Freddie Mac's chief economist.