Mortgage rates have recently dropped to the lowest level in two years, providing potential relief for prospective homebuyers in the market. The Federal Reserve announced its first interest rate cut in over four years on September 18, in an effort to balance stable prices and maximum employment amidst low inflation and a weakening labor market.

The average rate for a 30-year fixed-rate mortgage currently stands at 6.16%, marking a decrease of -0.16% from the previous week. Additionally, the average rate for a 15-year fixed mortgage has dropped to 5.38%, down by -0.19% compared to the same time last week. This significant reduction in mortgage rates is a direct result of the recent Federal Reserve interest rate cut.

Federal Reserve Chair Jerome Powell emphasized that as the Fed normalizes rates, the housing market is expected to follow suit. However, the challenges of high home prices and low inventory persist and cannot be solely addressed through interest rate adjustments. Despite the favorable decrease in mortgage rates, factors such as inflation data and labor market reports remain crucial in determining the future direction of rates.

Matt Vernon, the head of consumer lending at Bank of America, stated that mortgage rates have been on a downward trend since late July 2024. The Fed anticipates further rate reductions throughout the year, with the possibility of additional cuts in 2025. If these forecasts hold true, industry experts predict that average 30-year fixed mortgage rates could potentially fall to 6% by the end of the year. Nevertheless, prospective buyers are advised that a return to the historically low rates of 2-3% seen in recent years is unlikely amidst the current economic climate.