Mortgage Rates Inch Toward 6% as Fed Weighs October Cut

Mortgage rates fell for a fourth straight week, finally nearing 6 percent for the first time since September 2024.

Lenders and analysts are expecting the Federal Reserve to announce another quarter-point cut in the federal funds rate at its meeting on October 28-29. Central bankers will make their decision with limited information, as official data such as the September jobs report have not been released during the official government shutdown.

Average fixed 30 years Mortgage rates The APR fell four basis points to 6.04 percent in the week ending Oct. 23, according to rates provided to NerdWallet by Zillow. A basis point is one hundredth of a percentage point.

Fed Governor Christopher Waller said he supports further cuts to the Lord Federal funds rate Speaking to the Council on the Council in New York last week. He acknowledged that with economic activity and unemployment down, the Fed will need to proceed with caution.

Susan M. Collins, a fellow member of the Federal Open Market Committee and president and CEO of the Federal Reserve Bank of Boston, indicated she favored cutting rates in remarks to the Boston Chamber of Greater Commerce on October 14. He characterized inflationary risks as “somewhat over-present” as a threat to overall economic health.

Collins’ position on inflation was bolstered by the latest consumer price index, one of the few economic indicators we’ve gotten during the government shutdown. Released on October 24, it revealed Inflation At 3% over the past 12 months – slightly below economists’ expectations.

While the Fed needs to consider both inflation and employment, Waller said labor will be a “more important factor” in making monetary policy decisions. That means, a rate cut could lead to a bit more inflation, but the Fed may be willing to take that risk to stave off unemployment worries.

One argument against cutting rates is that rising inflation could have a negative impact on consumer spending, which is strong according to the latest available data. But reports pointing to a stronger economy may not capture the whole picture. Unemployment rate is measured across economic classes, while current spending levels are held disproportionately by wealthier consumers.

“The U.S. economy is broadly doing well,” Moody’s Analytics chief economist Mark Zindi wrote on X during last month’s Fed meeting. According to Zandi, during the second quarter of 2025, 20 percent of households will increase by income, while spending among 80 percent of U.S. households will largely match the pace of inflation since the pandemic.

Waller also mentioned this idea in his Oct. 16 speech, pointing out the outsized influence that high earners have on consumption figures while “not being affected substantially by high prices, high unemployment, or a sluggish economy.”

This dichotomy is also evident in the housing market, even as existing home sales rose 4.1 percent year-over-year in September. Lawrence Yun, chief economist for the National Association of Realtors, broke down home sales by price category in his call after the release of the current home sales report for September. “It’s the upper head that’s moving forward,” Yoon said.

He said sales of homes over $1 million rose 20% over the year, while sales of homes between $250,000 and $500,000 — where the typical American home falls — rose 10%.

Even with mortgage rates falling, homebuyers still face high prices and a limited supply of available real estate. Existing homeowners may be primed to take advantage of falling rates Refinancingespecially if they bought in the last few years.

For example, if you bought a home in the first week of May 2024, your mortgage rate could be somewhere around 7.32%. If you took out a $300,000 mortgage, refinancing at 6% could lower your monthly payments by about $290 and save you more than $66,700 over the life of the loan, even after paying closing costs.