Core Insights - Freddie Mac reported a decrease in mortgage rates, with the 30-year fixed-rate mortgage (FRM) averaging 6.26% as of September 18, 2025, down from 6.35% the previous week [1][4] - The share of mortgage applications for refinancing reached nearly 60%, the highest level since January 2022, indicating a strong response from homeowners to the declining rates [1] Mortgage Rate Trends - The 30-year FRM averaged 6.26% on September 18, 2025, compared to 6.09% a year ago, showing a year-over-year increase [4] - The 15-year FRM averaged 5.41%, down from 5.50% the previous week and up from 5.15% a year ago [4] Freddie Mac's Mission - Freddie Mac aims to enhance liquidity, stability, and affordability in the housing market, supporting families in buying, renting, or maintaining their homes since 1970 [3]

Core Viewpoint - The Federal Reserve is expected to initiate a series of interest rate cuts starting in 2025, with projections indicating a decline that may continue into the third quarter of 2026 [2][3][4] Interest Rate Cuts and Market Expectations - The Federal Open Market Committee (FOMC) has reduced the fed funds target rate by 0.25% to a range of 4% - 4.25% [3] - Financial markets anticipate a steady decline in the fed funds rate, potentially bottoming out just below 3% by the end of 2026 [4][10] Impact on Households - Lower interest rates will affect American households in two significant ways: reduced income from investments and lower payments on loans such as mortgages [5][6] - The average yield on money market funds is currently 4.08%, which is favorable compared to the inflation rate of 3.1% [7][8] Money Market Funds Outlook - As the Fed reduces interest rates, yields on money market funds are expected to decline, potentially falling below 3% by late 2026 [9][10] - The current inflow into money market funds, which exceeds $7.3 trillion, may reverse as yields decrease [8] Yield Curve Dynamics - An inverted yield curve has led to higher yields on short-term bonds compared to longer-term bonds, driving inflows into money market funds [11] - A return to a positively sloped yield curve is anticipated, making longer-term bonds more attractive as front-end rates decline [12][14] Mortgage Market Implications - Lower interest rates are expected to facilitate cheaper borrowing, particularly for mortgage refinancing, with average 30-year mortgage rates dipping below 6.5% [16][17] - Increased mortgage refinancing activity is anticipated as homeowners take advantage of lower rates, which are more closely correlated with the 10-year Treasury yield [17][18] Overall Economic Impact - The net effect of lower interest rates is viewed positively, as they provide cheaper borrowing costs while also reducing income from short-term investments [20][21] - The favorable environment for equities and other risk assets is also a significant consideration for investors [22]

Group 1 - Current homeowners are benefiting from the anticipated Fed rate cut, leading to a 58% increase in refinance applications in the last week and a 70% increase compared to the same week last year [1][8] - There is a notable rise in demand for adjustable-rate mortgages (ARMs), with the share of refinancing activity tied to ARMs reaching 12.9%, the highest since 2008 [2] - The surge in refinancing demand is driven by a significant drop in home borrowing costs, with the 10-year US Treasury yield decreasing to around 4.02% from a peak of 4.8% in early 2025, influencing mortgage rates [3] Group 2 - The 30-year fixed mortgage rate fell by 15 basis points to approximately 6.35%, marking the largest weekly drop in a year, while the 5/1-year adjustable mortgage rate decreased to 5.7% [4] - Overall mortgage activity is increasing, with total applications up 9.2% in the week ending September 5, indicating strong borrower demand since 2022 [8] - The rising activity suggests a positive outlook for the US housing market, which has been stagnant due to high borrowing costs, with expectations of mortgage rates dropping to around 6.25% by year-end as the Fed resumes its easing cycle [9]

Core Viewpoint - The recent decline in mortgage rates in the U.S. has significantly boosted refinancing activity, marking a revitalization in the housing market that has struggled for growth [1] Group 1: Mortgage Rate Changes - The 30-year mortgage contract rate fell by 10 basis points to 6.39% as of the week ending September 12 [1] - Mortgage rates have decreased for three consecutive weeks, providing new momentum to the housing market [1] Group 2: Refinancing and Purchase Applications - The refinancing activity index reached its highest level since early 2022, indicating a surge in refinancing applications [1] - The housing purchase application index also increased, suggesting a rise in demand for home purchases [1] Group 3: Market Expectations - Investors anticipate that the Federal Reserve will begin to lower the benchmark interest rate multiple times in the coming months [1] - The total mortgage activity index monitored by the Mortgage Bankers Association (MBA) has reached its highest point in over three years, encompassing both home purchases and refinancing [1] Group 4: Survey Methodology - The MBA's survey, conducted weekly since 1990, includes mortgage banks, commercial banks, and savings institutions, covering over 75% of retail housing mortgage applications in the U.S. [1]

Core Insights - Refinancing a mortgage can improve a homeowner's financial situation by securing a lower interest rate or reducing monthly payments, but it may temporarily hurt credit scores [1][14] Impact on Credit Score - A hard credit inquiry occurs when applying for a loan, leading to a slight decrease in credit score, typically by less than five points [3][4] - Multiple hard inquiries within a 12-month period can significantly lower credit scores, as borrowers with six or more inquiries are statistically more likely to declare bankruptcy [4] - Shopping for lenders within a 45-day window allows multiple inquiries to be treated as a single inquiry, minimizing credit score impact [5][6] Credit History Length - The length of credit history accounts for about 15% of the FICO score, with new loans potentially lowering the average age of credit accounts [7][9] - Refinancing can close an old mortgage account, which may temporarily reduce the credit score, but the score will recover as the new loan ages [10] Payment History - Payment history constitutes 35% of the FICO score, making timely payments crucial for maintaining a good credit score [11] - Delays in the refinancing process can lead to missed payments on the original mortgage, negatively impacting the credit score [12][14] - Homeowners must ensure all payments are made until the refinancing loan is finalized to avoid credit score damage [13] Overall Effects of Refinancing - While refinancing can lead to cost savings and lower monthly payments, it may also result in a slight decrease in credit scores and incur closing costs [15]