Mortgage rates saw yet another modest decrease Thursday, retreating to an 11-month low following the long Labor Day weekend and ahead of Friday’s closely watched release of the latest employment data.
The average rate on 30-year fixed home loans was 6.5% for the week ending Sept. 4, down from 6.56% the previous week, according to Freddie Mac.
Rates averaged 6.35% during the same period in 2024.
“Mortgage rates continue to trend down, increasing optimism for new buyers and current owners alike,” says Sam Khater, Freddie Mac’s chief economist. “As rates continue to drop, the number of homeowners who have the opportunity to refinance is expanding. In fact, the share of market mortgage applications that were for a refinance reached nearly 47%, the highest since October.”
The relatively steady rates reflect the market’s wait-and-see stance ahead of the Department of Labor’s upcoming jobs report for the month of August.
Realtor.com® senior economic research analyst Hannah Jones explains that historically, weaker-than-expected employment figures fuel optimism for Federal Reserve rate cuts and can lower bond yields, nudging mortgage rates lower.
On the other hand, a robust jobs report may reinforce inflation concerns and boost Treasury yields, pushing mortgage rates upward.
“This setup underscores the potential for increased mortgage rate volatility ahead,” says Jones.
And that could spell bad news for the housing market that is coming off a “cruel summer” marked by a standoff between buyers and sellers.
According to Jones, the market has been constrained by persistent affordability challenges, leaving buyers feeling sidelined due to still-high prices and mortgage rates, and sellers torn between wanting to offload their properties but being reluctant to offer discounts.
As a result, some frustrated sellers decided this summer to delist their homes and wait for better conditions, rather then compromise on their profit margins.
“As a result, the market remains in stasis, inventory improvements notwithstanding, persistent cost burdens and economic uncertainty continue to suppress demand throughout the home-buying season,” says Jones.
Adding to ongoing affordability headwinds, recent research highlights growing insurance-related financial burdens and climate-related exposure across U.S. housing markets, with more than a quarter of all homes (26.1%) with a combined value of nearly $13 trillion facing severe or extreme risk from flood, wind, or wildfire.
“Homeowners in high-risk areas often face substantially elevated premiums or uninsured gaps, which, when combined with high borrowing costs, could dampen demand or reshape buyer behavior,” adds Jones.
How mortgage rates are calculated
Mortgage rates are determined by a delicate calculus that factors in the state of the economy and an individual’s financial health.
They are most closely linked to the 10-year Treasury bond yield, which reflects broader market trends, like economic growth and inflation expectations.
Lenders reference this benchmark before adding their own margin to cover operational costs, risks, and profit.
When the economy flashes warning signs of rising inflation, Treasury yields typically increase, prompting mortgage rates to go up.
Conversely, signs of falling inflation or weakness in the labor market usually send Treasury yields lower, causing mortgage rates fall.
The mortgage rates you’re offered by a lender, however, go beyond these benchmarks and take some of your personal factors into account.
Your lender will closely scrutinize your financial health—including your credit score, loan amount, property type, size of down payment, and loan term—to determine your risk.
Those with stronger financial profiles are deemed as lower risk and typically receive lower rates, while borrowers perceived as higher risk get higher rates.
