Mortgage rates are down sharply since mid-October

As of last week, the average 30-year fixed-rate mortgage sits at 7.18%, according to Freddie Mac.

That’s not exactly low by recent standards. The rate hovered between 6% and 6.5% for much of 2025 and early 2026, but rates rose over the summer as war in the Middle East and inflation escalated and the Fed started raising interest rates.

By mid-October, the 30-year mortgage hit 7.4%. Since then, it’s fallen sharply, by more than 20 basis points. That’s welcome news for the still-struggling housing market.

The first thing to know is that mortgage rates are pegged to that key long-term investment benchmark: the 10-year Treasury bond.

Second thing to know? “The impossible forecast is forecasting the 10-year, and therefore the mortgage rate,” said Susan Wachter, a real estate professor at The Wharton School.

But we can look back to try and understand what’s been moving them recently.

“Why the pullback in rates? It’s because inflation, it’s hoped, will come down, with oil prices coming down,” Wachter said.

Investors are increasingly betting, following the midterms, that the U.S.’s war with Iran will wind down and the Fed will hike short-term rates one more time, then pause for a bit.

“The drop we’ve seen in mortgage rates is certainly very welcome, but it’s probably not enough to move the housing market significantly. We still have a war in the Middle East, we still have tariffs,” said Guy Cecala, head of Inside Mortgage Finance.

His prediction is that in the next month or two, mortgage rates will bounce around between 7% and 7.25%.

“I’m not holding my breath for mortgage rates to come down, I don’t think any seller or buyer should be waiting for that to happen,” said Redfin chief economist Daryl Fairweather.

She said while no one’s likely to save on their mortgage payment in the near-term, there is better news on the cost of purchasing a home.

“Home prices are very slowly correcting down, they are increasing slower than the pace of inflation. Which means that there is an opportunity for wages to catch up to home prices and for affordability to improve,” Fairweather said.

Unfortunately, there’s little hope for a surge in housing supply to come online any time soon.

Builder sentiment right now is at the lowest level since June 2012, according to Danushka Nanayakkara with the National Association of Home Builders.

“It’s a really tough situation for the builders right now. It’s the interest rates and then the energy and materials costs, and the worsening labor situation too,” she said.

Nanayakkara said deportations are causing a shortage of construction workers, while data centers are competing fiercely for skilled tradespeople, driving up wages.