Mortgage rates dropped to their lowest level in more than a year after the 10-year Treasury yield fell below 4%.
The average 30-year mortgage rate was 6.19% through Wednesday, according to Freddie Mac data, down from 6.27% a week earlier. Average 15-year mortgage rates were 5.44%, from 5.52%.
The 10-year Treasury yield, which mortgage rates closely track, dropped below 4% and stayed there this week as Wall Street braced for a prolonged government shutdown by flocking to safe-haven assets.
Read more: How the 10-year Treasury note affects your finances
Mortgage rates are also moving lower now as markets price in a likely rate cut from the Federal Reserve next week, and further cuts at future meetings. Traders currently see near-certain odds — 99% — that the central bank will cut benchmark interest rates by 25 basis points at its meeting next week, according to CME FedWatch.
“I think the mortgage market is trying to price in further Federal Reserve rate cuts in the coming months,” said Lawrence Yun, chief economist at the National Association of Realtors.
Though the government shutdown has delayed most data reports that regularly move mortgage rates, Consumer Price Index data for September will be released on Friday. Hotter-than-expected inflation may cause traders to reassess their views on the Fed’s rate-cutting path, sending mortgage rates higher, while lower inflation could be a catalyst for mortgage rates to decrease further.
Read more: How the government shutdown impacts the housing market
Mortgage rates have been falling since August, and there are signs that those drops are now bringing buyers off the sidelines. Existing home sales rose 1.5% in September from a month earlier, according to NAR data released on Thursday.
Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.
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