30-year conventional mortgage rate

Most mortgages are combined into groups and sold to investors, where they are traded on secondary markets. As a result, mortgage rates typically move in step with the yield on other fixed income securities, such as Treasury notes, plus a spread for relative risk, term length and liquidity. Like all other fixed income financial instruments, mortgage rates respond to inflation expectations, changes in investor appetite for risk and returns on assets classes, such as stocks, commodities and foreign currencies.

Mortgage rates declined for the sixth consecutive year in 2012, falling 0.80 percentage points to 3.66%. During the year, the mortgage rate eased to a historic low as growth in the economy fell short of market projections. However, the rebound started in 2013 continued through 2014, with the 30-year conventional mortgage rate reaching 4.17%; alternatively, the mortgage rate contracted 7.7% in 2015, largely because of falling rates from September 2014 to April 2015. In July 2015, the 30-year mortgage rate rose above 4.0%, reversing the below 4.0% mortgage rate trend that had occurred in prior months that year. In late 2016, the Federal Reserve (Fed) again raised the Fed funds rate, to the 50-75 basis point range, before raising rates again on three occasions in 2017 and four more through March 2019. However, the Fed reversed course in July 2019 when it cut the rate amid economic uncertainty and continued to cut rates in September and October.

While the Fed initially looked to maintain rates in early 2020, the rapid spread of COVID-19 (coronavirus) globally and the uncertain extent to which it would impact both global and US economic growth changed the Fed's initial course of action. The federal funds rate was cut to effectively 0% in March to shield the US economy from the impact of coronavirus. Furthermore, the Fed's wide-scale purchasing of bonds of varying maturities, including the 30-year bond, which the mortgage rate is linked to, further pushed down rates. This is expected to keep the 30-year fixed rate mortgage lower as banks can borrow at less expensive rates. While mortgage rates went lower in 2020 as the Fed funds rate declined, with higher unemployment, risk and uncertainty are still present, and this has effectively put a floor on mortgage rates.

The rate is also expected to remain relatively low in 2021, below the 2020 level. The mortgage rate exhibited strong growth during the first three months of 2021. However, the spread of the Delta variant, which became a dominant variant by July 2021, put downward pressure on the mortgage rate, contributing to a decline from 2.98% in June to 2.87% in July. However, the rate continued to grow, starting from August 2021. At the same time, on November 26, 2021, the World Health Organization designated a new variant of concern, Omicron. The economy continued reopening as vaccines and boosters targeting new variants were available.

The sudden influx of spending from the commercial and consumer side, coupled with increases in wages, drove up inflation. Inflationary concerns led the FOMC to aggressively raise the Federal Funds Rate in 2022. Aggressive rate hikes lasted through 2022, but decelerated in early 2023 as inflation showed signs of slowing. The Federal Reserve dropped interest rates in September 2024 for the first time since COVID-19. The 30-year conventional mortgage rate is projected to rise sharply, reaching 5.96% by 2025. This increase has been influenced by growing U.S. government debt, which has led to the issuance of more government bonds and higher yields. As yields have risen, so have mortgage rates, which are expected to grow by an additional 1.1% in 2025.