Mortgage Rates Fall to Lowest Level Since 2024, But Relief May Be Short-Lived

U.S. mortgage rates dropped this week to their lowest point in nearly a year, offering a glimmer of relief for homeowners and prospective buyers navigating an expensive housing market. According to Freddie Mac data, the average 30-year fixed mortgage rate slipped to 6.58%, down from 6.63% last week and the lowest reading since October 2024. The 15-year fixed rate also eased slightly, falling to 5.71%.

The decline comes as financial markets grow more confident that the Federal Reserve will cut benchmark interest rates in September. Although mortgage rates aren’t set directly by the Fed, they tend to move in tandem with expectations about the central bank’s future policy decisions.

Weak job growth in recent months and inflation figures that undershot economists’ projections have increased the likelihood of a rate cut. Traders now see a more than 90% probability of the Fed reducing rates by 25 basis points next month. That anticipation has already been factored into mortgage pricing, helping push borrowing costs lower.

Economists caution that borrowers shouldn’t assume today’s levels will continue falling. With much of the expected Fed policy shift already “priced in,” mortgage rates may hover in the current range rather than dropping sharply after the central bank makes its move. Some analysts even suggest volatility could return as new economic data on jobs, wages, and consumer spending is released in the coming weeks.

In other words, the window for buyers to lock in a rate in the mid-6% range may be limited.

For now, the latest decline in borrowing costs has sparked a modest uptick in refinancing activity. Applications to refinance existing mortgages rose 23% in the past week, according to data from the Mortgage Bankers Association. Purchase applications, however, barely moved, rising just 1% as affordability challenges continue to weigh heavily on potential buyers.

Even at 6.58%, mortgage rates remain well above pre-2022 levels, when many borrowers were able to secure loans below 4%. Combined with elevated home prices and limited housing supply, that means affordability remains stretched for first-time buyers in particular.

The direction of mortgage rates through the rest of 2025 will depend largely on how quickly the economy cools and how aggressive the Fed becomes in easing monetary policy. If inflation continues to trend lower and job growth slows further, rates could remain at the lower end of their recent range. However, any surprises in economic data could push borrowing costs higher again.

For now, borrowers considering a purchase or refinance may find this moment to be one of the most favorable opportunities since late last year.

Fannie Mae and Freddie Mac Edge Closer to Historic IPOs

Key Points:
– Administration aims to take mortgage giants public by year-end, potentially valuing them at $500B+.
– Fannie and Freddie have been under federal conservatorship since the 2008 financial crisis.
– Privatization could reshape the $12T U.S. housing finance system.

President Donald Trump’s administration is pushing ahead with plans to take mortgage finance giants Fannie Mae and Freddie Mac public before the end of 2025, a move that could mark one of the largest and most closely watched privatizations in U.S. history.

According to people familiar with the matter, discussions are underway that could value the two government-sponsored enterprises (GSEs) at a combined $500 billion or more. The share sales could raise roughly $30 billion, injecting fresh capital into companies that have been under federal control since the 2008 financial crisis.

Fannie Mae and Freddie Mac play a central role in the U.S. housing market, buying mortgages from lenders, packaging them into mortgage-backed securities (MBS), and guaranteeing timely payment of principal and interest to investors. By recycling capital back to banks and mortgage companies, they help ensure a steady flow of financing for homebuyers, multifamily developers, and real estate investors.

Both companies were placed into conservatorship in September 2008 after the housing market collapse left them on the brink of insolvency. The U.S. Treasury provided a combined $191 billion in support, receiving preferred shares in return. Over the years, the companies have paid the government more than that amount in dividends, but attempts to return them to private ownership have repeatedly stalled amid political divisions and the complexity of reforming the $12 trillion mortgage market they underpin.

Trump has long signaled his desire to end federal conservatorship of the mortgage giants, including during his first term. His return to the White House has revived optimism among investors who have held shares in the companies for years in anticipation of privatization. Billionaire hedge fund manager Bill Ackman, a prominent shareholder, has said he expects Trump to complete the process.

Still, the road to IPOs is unlikely to be straightforward. Fannie and Freddie guarantee or own about half of all U.S. home loans, meaning any shift in ownership must be carefully managed to avoid disrupting housing finance. The administration is expected to keep some form of oversight in place even after the companies are privatized, with Trump previously saying in May that he intends to retain a role for federal supervision.

Market reaction to the Wall Street Journal report on the IPO plan was swift. Shares of both companies, which trade over the counter, surged more than 21%, hitting their highest levels in over a month.

In recent days, Trump has met with the CEOs of major banks including Citigroup and Bank of America to discuss the potential privatization, according to earlier Reuters reporting. Financial institutions are expected to play a critical role in structuring the offerings and preparing the companies for life after conservatorship.

If successful, the IPOs of Fannie Mae and Freddie Mac would represent a historic shift in the U.S. housing finance system—one that could reshape the secondary mortgage market, alter investor participation in MBS, and redefine the federal government’s role in backstopping the nation’s home loan market.