After months of stubbornly high borrowing costs, there’s finally good news for homeowners and homebuyers: rates are falling. Mortgage rates have dropped sharply in recent weeks, reaching their lowest levels in nearly a year. For the first time in months, demand in the housing market is showing real signs of life.

A Sharp Drop in Mortgage Rates

The average 30-year fixed mortgage rate slid to 6.49%, its lowest point in 11 months. That decline may not sound dramatic, but in the world of mortgage financing, even a fraction of a percentage point can mean hundreds of dollars saved every month.

Lenders are already reporting a surge in applications. Refinance requests jumped more than 12% last week, and purchase loans are climbing too. After being stuck in the slowest housing market in over a decade, buyers and sellers alike are sensing that conditions are beginning to shift.

Why Rates Are Coming Down

The drop isn’t happening in a vacuum. Several economic forces are working together to push borrowing costs lower:

• Weak job growth: The U.S. economy added just 22,000 jobs in August, a sharp slowdown that’s raising concerns about the strength of the labor market.

• Cooling inflation: Wholesale prices unexpectedly fell 0.1% last month, signaling that inflationary pressures are easing.

• Federal Reserve outlook: With growth slowing and inflation under control, markets now expect the Fed to cut interest rates at its September meeting — possibly by as much as half a percentage point.

Together, these shifts have boosted investor confidence that borrowing costs will keep easing, leading to a dip in mortgage rates.

What It Means for You

For homeowners, this is the first real window in months to refinance at a lower rate. On a $400,000 loan, a drop of just half a percentage point could save around $250 a month. That’s meaningful relief for households stretched by high costs of living.

For buyers, lower rates translate directly into improved affordability. While home prices remain high in many markets, the math is finally tilting back toward opportunity. Some buyers who were priced out earlier this year may now find a path back into the market.

The Road Ahead

The big question is whether this is the start of a longer trend or just a temporary reprieve. Much depends on what the Fed does in its upcoming policy meeting, and on whether the labor market continues to weaken. A decisive rate cut would provide additional momentum, while any surprise uptick in inflation could cause the Fed to hold steady.

For now, though, the tide is turning. Rates are falling nationally, and the housing market — long stalled by high borrowing costs — is finally stirring back to life.

Bottom Line

• Homeowners: It may be a good time to talk to your lender about refinancing.

• Homebuyers: Keep an eye on rates over the coming weeks; lower borrowing costs could open new opportunities.

• Everyone else: Watch the Fed closely — the decisions it makes in the next month will set the tone for rates heading into the end of the year.