US 30-year mortgage rates fall to two-year low of 6.15%

By Ann Saphir

(Reuters) – The interest rate on the most popular home loan in the United States fell to its lowest in two years last week, amid expectations that the Federal Reserve will begin cutting interest rates on Wednesday, possibly by as much as half a percentage point.

The average contract interest rate for a 30-year fixed-rate mortgage fell 14 basis points to 6.15% in the week ended Sept. 13, the Mortgage Bankers Association said Wednesday. That was the lowest rate since September 2022 and followed a 14 basis point decline the previous week.

According to the MBA, applications for home equity loans for purchase and refinance jumped last week, citing lower borrowing costs and improved housing affordability as home prices rose more slowly.

According to the data, applications to refinance existing home loans now account for more than half of all mortgage applications and are above the historical median of 48%.

This is an indication that homeowners are already taking advantage of the drop in mortgage rates to lower their monthly payments, potentially boosting their spending, even before the Fed has raised its benchmark interest rate.

Mortgage rates in the US peaked at nearly 8 percent about 11 months ago and have since fallen by about 175 basis points after the Fed signaled that its rate hike campaign for 2022-2023 was over and its next step would be a rate cut.

The Fed ends its Sept. 17-18 meeting later on Wednesday and, in addition to a rate cut, is expected to release new forecasts for the path of the federal funds rate over the next few years. The most recent forecasts in June suggested a 125 basis point cut by the end of 2025. Analysts expect this month's forecasts to include a larger decline.

(Reporting by Ann Saphir; editing by Sandra Maler and Andrea Ricci)