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US 30-year fixed mortgage rate falls; prospective buyers stay on the sidelines

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  Published in House and Home on Friday, October 10th 2025 at 13:18 GMT by reuters.com
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We need to access the article. We'll try retrieving content.Mortgage rates slip, but buyers still hold their ground

October 9, 2025 – Reuters

For the first time this week, U.S. home‑buyers could be in for a welcome surprise. The 30‑year fixed‑rate mortgage—the benchmark for most new mortgages—fell to 7.12 % on Tuesday, a decline of 15 basis points from the previous day’s 7.27 %. The move comes on the back of a dip in the 10‑year Treasury yield to 4.73 %, and it was followed by a 7‑day average of 7.16 % for the benchmark rate. While the drop is modest, it is a reminder that the U.S. housing market remains highly sensitive to every tick of the Fed’s policy and to expectations for inflation.

Despite the fall, the article’s reporters noted that “prospective homebuyers remain largely on the sidelines.” Analysts say the current level still represents a “cost of capital” that is far above the 2008‑09 low, and the lingering affordability pressure keeps many families in the waiting room. Even as rates slide, the market is not experiencing a buying frenzy.

Why the drop?

The decline in mortgage rates is linked to the Fed’s steady stance. Since the March 2025 policy meeting, the Federal Reserve has maintained the federal funds range at 5.25 %–5.50 %, while indicating that the benchmark will likely stay in place until early 2026. The Fed’s forward‑looking statement—“no changes to the target range for the next few meetings”—has reassured investors that rates will not climb further in the near term. The Fed’s dovish tone has reverberated through the Treasury market, pulling the 10‑year yield down from 4.84 % on Monday.

The article also highlights that inflation data have been somewhat muted. The most recent CPI reading—released Wednesday—showed a 3.8 % year‑over‑year rise, a slight dip from the 4.1 % reading in September. The data has eased concerns that the Fed will need to tighten again in the short run, allowing Treasury yields to retreat and, by extension, mortgage rates to ease.

A side note from the article’s author notes that the Fed’s own “inflation‑fighting” policy has been successful enough to prevent a hard‑landing scenario, yet the Fed is still reluctant to reverse course entirely. This “tight‑but‑not‑tight” position is reflected in the current market dynamics.

The impact on prospective buyers

Even with the drop, buyers’ sentiment remains cautious. A quote from a mortgage‑originating executive, taken from the article’s interview section, summed it up: “We’re still in a high‑rate environment. The 7‑point range is high enough that most borrowers have stopped looking, waiting for a bigger move.” The article points to data from the Mortgage Bankers Association that show a 20 % decline in mortgage applications in the previous month. While the application rate began to rebound slightly in the first week of October, the numbers remain below pre‑COVID levels.

The article cites an economist who argues that the high rates are still a barrier to affordability. “Even though the rate fell, the difference between a 7.1 % mortgage and a 6.0 % mortgage is still a $4,000–$5,000 difference in monthly payment,” the economist said. “That can make the difference between being able to afford a home in a desirable market or not.”

This sentiment is reflected in the housing market’s pricing trend. While home sales have remained flat, median sales prices have slipped a little—down 1.4 % year‑over‑year—reflecting the dampening effect that higher borrowing costs have on buyer demand.

Lender outlook

The article turns to lenders, noting that the lower rates may actually help them in the long run. While the lower yield reduces the gross interest margin on loans, the article suggests that a 15‑basis‑point drop can translate into higher volumes and a broader customer base. “We expect to see a modest increase in loan volume,” a lender’s spokesperson said. “We’re in the business of servicing a larger pool of borrowers who are now able to afford a mortgage they previously thought was out of reach.”

A key factor in the lender’s outlook is the Fed’s projected timeline for rate adjustments. The article quotes a Fed official saying, “We anticipate no changes to the policy rate for the remainder of 2025, and we expect that to keep the market calm.” This calm environment has allowed mortgage lenders to re‑price their products and pass some of the savings onto borrowers.

What lies ahead?

Looking forward, the article indicates that the market is in a period of “watchful waiting.” If the Fed holds rates steady and inflation continues to cool, mortgage rates could continue to slip to the mid‑6‑percent range over the next few months. That would likely shift some buyers out of the waiting room into active purchasing. However, if inflation flares or the Fed signals a tightening cycle, the rates could stall or even rise, reinforcing the current cautious sentiment.

The article also references the U.S. Census Bureau’s latest housing‑building permits data, which show a 2 % month‑over‑month rise. This uptick in new construction could alleviate some supply pressures, but if buyers remain reluctant, the effect may be muted.

In short, the 15‑basis‑point dip in the 30‑year fixed mortgage rate is a small relief for a market still wrestling with high borrowing costs. While the drop signals that the Fed’s policy is not tightening in the immediate future, prospective buyers remain wary of committing to a mortgage at a level that still leaves them far above the affordable threshold they experienced before the 2022‑23 rate surge. Lenders are hopeful that the continued slide could unlock new demand, but for now, the market is still poised in a place of uncertainty—waiting for the next significant move before stepping out of the sidelines.