US mortgage rates have just had their biggest weekly drop in a year, at 6.35%, down from 6.50% a week earlier

After months of hesitation in a sluggish housing market, buyers may finally be getting a reason to reenter: mortgage rates are dropping sharply.

The average 30-year fixed mortgage rate fell to 6.35% for the week ending September 11, down from 6.50% the week before, according to Freddie Mac data released Thursday. That marks the steepest weekly decline so far this year.

The fall in borrowing costs comes as bond markets signal deeper economic weakness, with recent labor data pointing to a softer job market than previously believed. Investors, anticipating that the Federal Reserve will slash rates aggressively in the months ahead to support growth, have driven mortgage rates lower.

Though the Fed doesn’t directly set mortgage rates, they move in tandem with the 10-year Treasury yield, which sank this week to its lowest since April. At that time, President Donald Trump’s tariff announcements had already raised concerns of a slowdown.

The easing in mortgage rates could provide a lift to a housing market where high borrowing costs, costly insurance, and elevated listing prices have sidelined many buyers. Mortgage demand surged to a three-year high last week, with both purchase and refinance applications increasing, the Mortgage Bankers Association reported.

Still, affordability remains a challenge. National home prices have continued to climb, limiting the benefit of lower rates. True relief, experts say, would require both a sustained decline in borrowing costs and a cooling of home prices. Even so, some believe the drop below 6.5% could have an important psychological effect, nudging more buyers back into the market.

Markets are already betting on a September rate cut by the Fed, according to lending executives, as policymakers weigh weakening economic signals against persistent inflation pressures.