Mortgage Rates Drop to 1-Month Low, Offering Buyers Relief Ahead of Midterm Elections

Mortgage rates dropped to their lowest level in over a month this week as investors digested the Federal Reserve’s decision to hold interest rates steady while continuing to seek refuge in the safety of government bonds amid a slump in the stock market. 

The average rate on 30-year fixed home loans dropped to 7.24% for the week ending Oct. 29, down from 7.32% the prior week, according to Freddie Mac. 

For perspective, rates averaged 6.17% one year ago.

"The average 30-year fixed-rate mortgage declined again this week, reaching its lowest level this month and modestly boosting purchasing power for prospective buyers," says Sam Khater, Freddie Mac's chief economist.

Arriving just ahead of next week’s midterm elections, the latest mortgage rate reading comes a day after Federal Reserve policymakers voted 10-2 to leave the benchmark rate unchanged at its current 3.75%-4% range. 

Realtor.com® senior economist Joel Berner notes that the main driver behind the downturn in the trajectory of mortgage rates is the 10-year Treasury yield, which averaged roughly 5.02% earlier this week, down from 5.13% the week before.

"The retreat in the Treasury yield was spurred on by volatility in the stock market, leading investors to seek safety in government debt," he says. 

At the same time, Berner contends that weak housing data, including softer home construction activity, record-low pending sales, and declining new home sales, could be creating a feedback loop.

“A struggling housing market can be a sign of weaker economic growth to come, which lowers the returns investors demand on their bond purchases," notes the economist. "In turn, this allows mortgage rates to fall and hopefully alleviate some of the negative effects being experienced by the housing market."

Looking ahead, investors are anticipating another federal funds rate increase in December. In the wake of Wednesday's Federal Open Market Committee (FOMC) meeting, the likelihood of a hike climbed to nearly 80%, according to CME FedWatch.

"Expectations of further Fed tightening are widespread, but the upcoming data releases on inflation and employment before Dec. 9 will give stronger indication of whether upward pressure on mortgage rates is in store," forecasts Berner. "The Fed appears laser-focused on the price level, and another month of core inflation coming in above their target of 2% would justify those rate hike expectations."

For homebuyers, this week's modest retreat in mortgage rates is welcome news, yet Berner points out that it comes during a period in the year where home sales activity is usually more subdued. 

The best time of year to buy a home has passed for most markets in the country, and the winter slowdown is looming, so the rate relief this week may not have a significant impact on the market. 

"Both buyers and sellers are hoping that the downward trajectory of the last two weeks is a sign of things to come, and that the great housing market unlocking becomes a reality in 2027," concludes Berner. 

This week, the number of homes for sale rose 8% compared to a year ago, the highest weekly growth rate since late January, according to the latest Realtor.com weekly housing trends report. Inventory has been building momentum throughout the fall, rising from roughly 4% year-over-year growth in late August to 8% now.

New listing activity continued to slow down, dropping 1.5% year over year, as sellers have grown discouraged.

Meanwhile, the median asking price fell 1.4% year over year to $414,000.

How your credit score affects your mortgage

Your credit score plays a role when you apply for a mortgage. A credit score will determine whether you qualify for a mortgage and the interest rate you'll receive. The higher the credit score, the lower the interest rate you'll qualify for.

The credit score you need will vary depending on the type of loan. A score of 620 is a "fair" rating. However, people applying for a Federal Housing Administration loan might be able to get approved with a credit score of 500, which is considered a low score.

Homebuyers with credit scores of 740 or higher are typically considered to be in very good standing and can usually qualify for better rates, which can reduce monthly payments.