Mortgage rates declined for the third consecutive week, with the average 30-year fixed-rate mortgage falling to 7.18%, down from 7.24% last week.
The 15-year fixed-rate mortgage also declined, averaging 6.57%, compared with 6.60% a week earlier.
Homebuyers are getting some relief, but mortgage rates remain nearly a full percentage point higher than a year ago, continuing to put pressure on housing affordability.
Mortgage rates moved lower for the third consecutive week, providing a measure of relief to prospective homebuyers who have faced sharply higher borrowing costs for much of the fall.
According to Freddie Mac's latest Primary Mortgage Market Survey, released Thursday, the average 30-year fixed-rate mortgage fell to 7.18%, down six basis points from 7.24% the previous week.
The decline continues a downward trend that began in mid-October, when the average 30-year rate stood at 7.40%. Over the past three weeks, rates have fallen a total of 22 basis points.
“Mortgage rates continued their downward trajectory this week, improving the environment for prospective homebuyers against a backdrop of strong economic growth,” said Sam Khater, Freddie Mac's chief economist.
Despite the recent improvement, borrowing costs remain considerably higher than they were at this time last year, when the average 30-year mortgage rate was 6.22%. However, in the wake of the midterm elections, Treasury bond yields have dipped. A continued trend would be bullish for mortgage rates.
The average 15-year fixed-rate mortgage also edged lower this week, declining to 6.57% from 6.60%. A year ago, the 15-year rate averaged 5.50%.
Lower rates mean smaller monthly payments
Even relatively modest changes in mortgage rates can make a difference for homebuyers, particularly those purchasing higher-priced homes.
For example, a buyer financing a $400,000 home with a 20% down payment would need a $320,000 mortgage.
At the 7.40% rate reported in mid-October, the monthly principal and interest payment on a 30-year loan would be approximately $2,216.
At this week's 7.18% rate, that payment would fall to about $2,168, a savings of roughly $48 per month, or $576 annually.
Those calculations do not include property taxes, homeowners insurance or other expenses, which can add hundreds of dollars to a monthly housing payment.
However, the comparison with a year ago is less encouraging. At last November's 6.22% rate, the same $320,000 mortgage would have carried a monthly principal and interest payment of approximately $1,964, about $204 less than today's payment.
Why mortgage rates are falling
Mortgage rates generally move in the same direction as yields on 10-year U.S. Treasury securities, which are influenced by inflation expectations, economic growth and investor demand for bonds.
Treasury yields have retreated from their October highs, helping to pull mortgage rates lower. The 10-year Treasury yield was around 4.84% Thursday, down from more than 5.30% in early October.
The recent decline follows a period of significant volatility in the bond market, driven partly by inflation concerns and higher energy prices.
While the Federal Reserve's monetary policy influences borrowing costs, the central bank does not directly set mortgage rates. Those rates can rise or fall even when the Fed leaves its benchmark interest rate unchanged.
Will lower rates bring buyers back?
The three-week decline could encourage some prospective buyers who postponed purchases when rates climbed above 7.3% in October.
However, affordability remains a substantial obstacle. Home prices are still elevated in many markets, and the combination of mortgage payments, property taxes and insurance continues to stretch household budgets.
There is also the question of whether the recent improvement will last. Mortgage rates remain sensitive to inflation reports, economic data and changes in Treasury yields.
For buyers considering a purchase, the recent decline may provide an opportunity to revisit mortgage calculations and compare offers from several lenders.
Shopping around can be particularly important because the rates offered to individual borrowers may differ from Freddie Mac's national average, depending on credit scores, down payments, loan terms and other factors.
Freddie Mac's survey focuses on conventional, conforming home purchase loans for borrowers with excellent credit who make a 20% down payment.
The bottom line: Mortgage rates are moving in the right direction for homebuyers, but the improvement has not yet been large enough to erase the affordability challenges created by higher home prices and borrowing costs. Whether rates continue to decline could play an important role in determining how much activity returns to the housing market as 2026 draws to a close.