Mortgage rates fall to 6.50% as bets on Fed easing grow

U.S. mortgage rates fell again this week, offering buyers and refinancers modest relief as markets react to a weak August jobs report and growing expectations that the Federal Reserve will begin cutting short term interest rates. Freddie Mac said Thursday the average rate on a 30 year fixed mortgage dropped to 6.50 percent for the week ending Sept. 4, down from 6.56 percent the prior week. Other lenders and data providers reported even lower real time readings, reflecting differences in methodology and timing.

The retreat in long term borrowing costs has been driven largely by a decline in Treasury yields and investor bets on Fed easing. The yield on the 10 year Treasury was about 4.18 percent midday Thursday, down from roughly 4.22 Wednesday, and several private trackers showed 30 year purchase rates dipping into the low 6s. Zillow reported a national average of roughly 6.12 percent for 30 year purchase loans in its latest update, noting its figures assume an 80 percent loan to value ratio and credit scores in the 680 to 739 range.

Sam Khater, Freddie Mac's chief economist, said the slide in rates is boosting optimism for prospective buyers and expanding the pool of homeowners...