Mortgage rates fell to their lowest level in more than a year this week, improving affordability and bolstering homebuyer purchasing power—but the drop has yet to spark a significant revival in housing demand, as buyers remain cautious.

Freddie Mac said on Oct. 23 that the average rate on a 30-year fixed mortgage declined to 6.19 percent, down from 6.27 percent last week and nearly a full percentage point below its January peak above 7 percent. The rate is now the lowest since October 2024, when it briefly hit 6.12 percent.

“Mortgage rates continued to trend down this week, hitting their lowest level in over a year,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

“At the start of 2025, the 30-year fixed-rate mortgage surpassed 7 percent, while today it hovers nearly a full percentage point lower. This dynamic has kept refinancings high, accounting for more than half of all mortgage activity for the sixth consecutive week.”

Rates on 15-year fixed mortgages, often used by homeowners to refinance, also eased to 5.44 percent from 5.52 percent a week ago, Freddie Mac said.

Affordability Improves, But Buyers Still Wary

The decline in rates is translating into measurable gains in buying power. According to a Redfin report released on Oct. 23, a homebuyer with a $3,000 monthly budget can now afford a $473,750 home, up from $447,750 a year ago when rates hovered near 6.85 percent. That’s a $26,000 boost in affordability.

Yet the number of pending home sales continues to fall. Redfin said contracts to buy homes slipped 0.7 percent year over year in the four weeks ending Oct. 19, marking the third straight week of declines.

“There are a few reasons buyers are wary,” the Redfin report states.

“One, the forces pushing mortgage rates down—economic uncertainty and political tensions—are also making some house hunters feel uneasy about making a major purchase.”

Another factor is that prices remain stubbornly high. The median U.S. home-sale price climbed 2 percent from a year ago to $391,250, the biggest increase in six months, Redfin noted.

Sellers Step Forward as Buyers Hold Back

While demand remains tepid, supply is loosening, according to Redfin. New listings rose 4.6 percent, the biggest increase in nearly five months, as homeowners try to take advantage of the lower-rate environment to attract buyers. Active listings are up 7.1 percent from last year, bringing the market to 4.6 months of supply, a level considered “balanced.”

“Nationwide, there are half a million more home sellers than buyers,” Redfin said in its report.

“The big gap between home sellers and buyers, along with the improvement in purchasing power, makes it a good time for buyers who can afford today’s high housing costs to jump into the market.”

Dallas-based Redfin Premier agent Amanda Peterson said some sellers are cutting prices or offering steep concessions to close deals.

“Buyers are scoring deals, especially those who can pay all cash and/or those who are open to new construction,” Peterson said.

Builders, too, are responding to the softer market with incentives, including discounts of up to $20,000, mortgage-rate buydowns—sometimes below 4 percent—and free appliances, she added.

Existing Home Sales Tick Up in September

The National Association of Realtors (NAR) reported on Oct. 23 that transactions have seen a modest rebound, with existing-home sales rising 1.5 percent in September to a seasonally adjusted annual rate of 4.06 million units. That’s a 4.1 percent increase from a year earlier and the fastest pace since February.

“As anticipated, falling mortgage rates are lifting home sales,” NAR Chief Economist Lawrence Yun said, adding that “improving housing affordability is also contributing to the increase.”

Inventory climbed to 1.55 million units, a 1.3 percent gain from August and 14 percent higher than a year ago.

The median existing-home price rose 2.1 percent year over year to $415,200, marking the 27th consecutive month of annual price gains.

Meanwhile, the sustained pullback in rates has triggered a wave of refinancing activity. While overall mortgage applications fell 0.3 percent last week, refinancings jumped 4 percent to a level 81 percent higher than the same week one year ago, according to an Oct. 22 report from the Mortgage Bankers Association (MBA).

“The lowest mortgage rates in a month spurred an increase in refinance activity,” MBA Vice President and Deputy Chief Economist Joel Kan said in a statement, adding that the data shows that borrowers are “attentive” to opportunities to lower their monthly mortgage payments.

Economists widely attribute the rate declines to expectations of additional Federal Reserve rate cuts, which have pushed the 10-year Treasury yield below 4 percent in recent weeks. The Fed last month cut its benchmark rate for the first time in a year and signaled two more reductions before year-end.