As a result of the Federal Reserve's (Fed) recent interest rate cuts, the national average mortgage rate has dropped to its lowest level in two years.

According to Freddie Mac, the average 30-year fixed mortgage rate was 6.08% as of the 26th, marking the lowest level since September 15, 2022, when it stood at 6.02%. Mortgage industry experts predict that mortgage rates could drop below 5% as early as next week.

Compared to the peak of 7.79% on October 2023, a 23-year high, mortgage rates have fallen by 1.71 percentage points.

The Fed’s recent decision to lower the federal funds rate from 5.25–5.50% to 4.75–5.00% through a significant 0.50 percentage point "big cut," with more cuts expected, has contributed to the decline in mortgage rates.

The mortgage industry expects rates to continue a steady decline due to the Fed's ongoing interest rate reduction strategy. Since mortgage payments are the largest financial burden for homeowners, this drop in rates is welcome news for both new and existing homeowners.

A difference of just 1% in mortgage rates can save homeowners hundreds of dollars per month and thousands annually.

Real estate website Realty.com pointed out that with mortgage rates dropping from 7.79% in October 2023 to 6.08%, buyers of a home at the national average price of $429,990 could save $363 per month or $4,356 annually. In California, for a median-priced home in Los Angeles at $1,159,000, the savings would be even greater—$976 monthly or $11,712 annually.

As mortgage rates decrease, there is hope that the U.S. housing market, which had been sluggish due to high rates, will regain momentum.

However, many prospective homebuyers are still holding out, anticipating further rate drops. Analysts suggest that a 5% mortgage rate is a psychological threshold for many buyers.

Freddie Mac's chief economist, Sam Khater, said, “As rates continue to decline, refinancing into lower-rate loans is increasing. Many prospective buyers are waiting for upcoming economic indicators over the next few weeks to see if rates will fall even further.”

— Reporter Hwan-dong Cho

<Hwandong Cho>