The US 30-year mortgage rate has dropped to 6.35% from 6.5% last week, according to Freddie Mac. This is the lowest rate since October 2024, with the year’s lowest point at 6.08%. Since reaching a high of 7.04% in mid-January, the mortgage rate has decreased to the current 6.35%. For a mortgage of $337,920, based on a median home price of $422,400, this drop means monthly savings of $157.

Monthly Payment Savings

When the rate was at 7.05%, the monthly payment was about $2,260. Now, at 6.35%, it’s around $2,103, resulting in a savings of $157 each month. Over 30 years, this adds up to roughly $56,500 in total savings. This reduction in rates can be beneficial for potential homebuyers, leading to lower monthly payments. As the 30-year mortgage rate falls to 6.35%, we can expect continued strength in investments that react to interest rates. This decline is primarily a response to the 10-year Treasury yield, which fell below 4.10% after last week’s weaker-than-expected August 2025 jobs report. We see this as a chance to consider long positions in Treasury note futures, as the market anticipates a more lenient Federal Reserve. This easing in financial conditions positively affects the housing market, creating opportunities in equity derivatives. There has been an increase in call option volume on homebuilder ETFs, with the ITB index rising 4% in just the past five trading days. This suggests that traders are getting ready for a robust autumn building season, encouraged by the lowest mortgage rates since last October.

Historical Patterns and Market Strategies

We can recall a similar situation in 2019 when the Fed shifted from tightening policies. This caused rates to drop and sparked a multi-quarter rally in housing stocks. That time showed us that even minor rate drops could significantly enhance buyer sentiment and boost builders’ profits. This historical trend indicates that we should expect similar patterns to continue through the rest of the year. The broader market outlook suggests less overall volatility as concerns about further rate hikes diminish. The VIX has already fallen to 15.2, its lowest point in almost a year, indicating a more stable market. This stability could make strategies that profit from steady or rising asset prices, such as selling out-of-the-money put options on the S&P 500, more appealing in the upcoming weeks. Create your live VT Markets account and start trading now.

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