The average interest rate on a conventional mortgage in the U.S. dropped to 6.06%, the lowest level in more than three years, Freddie Mac said on Thursday. 

A recent dip in mortgage rates has spurred homebuying activity, with purchase applications on the rise and more owners acting to refinance their loans, according to the government-sponsored enterprise.

A year ago, the rate on a 30-year fixed-rate mortgage averaged 7.04%. The last time the rate on a typical mortgage was lower was Sept. 15, 2022, when it was at 6.02%.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell this week, dropping to 5.38% from 5.46% last week. A year ago, that average rate was at 6.27%, Freddie Mac said.

Mortgage rates began ticking down in July in anticipation of a series of interest-rate cuts by the Federal Reserve, which began in September and continued last month. 

Although the central bank doesn't set rates for home loans, trimming its benchmark rate often points to lower inflation or softer economic growth, spurring investors to buy U.S. government bonds. That can help lower yields on long-term U.S. Treasurys, which can result in lower mortgage rates.

Although mortgage rates are easing, homeownership remains beyond the means of many Americans. 

A January report from Attom, a provider of property data, found that median-priced homes are less affordable than usual in 99% of the 594 counties for which sufficient data were available. The national median home price has hovered around $365,000, which is a record high, the group noted. 

"Many Americans were priced out of buying a home in 2025, and affordability remains worse than historic norms in most markets," Attom CEO Rob Barber said in a statement earlier this month. 

The cost of a typical home has climbed 54% of the past five years, while typical wages have risen 29%, the group also noted, citing federal labor data. 

Trump's housing proposals

President Trump last week announced two measures aimed at promoting homeownership, proposing to bar institutional investors from buying homes and also directing the federal government to purchase $200 billion worth of mortgage bonds. 

Experts said the proposed ban could ease pressure on home prices, citing research showing that large investors can drive up home prices in communities where they invest. 

Ben Ayres, a senior economist at Nationwide Economics, has estimated that the government buying $200 billion in mortgage securities could reduce home loan rates by up to 0.35 percentage points, 

Home prices have also surged because of a dearth of affordable housing. The U.S. would need to build as many as 4 million additional homes beyond the normal pace of construction to address that shortage, according to Goldman Sachs.

Christy Bunce, president of mortgage lender New American Funding, told CBS News that more prospective buyers entering the market would drive up home prices.  "But I don't think we are in a market where we're going to see crazy appreciation," she added.

Lower mortgage rates also present an opportunity for current homeowners to refinance their loans, Bunce added. 

"It's a good time to refinance, because nobody has a crystal ball to figure out what rates are going to do in the future," she told CBS News.

Erik Schmitt, a Chase Home Lending executive, said that homeowners "may be able to significantly reduce their monthly mortgage payment or shorten their loan term" as borrowing costs ease.

"That said, it's important for homeowners to factor in closing costs, how much remains on their loan balance, and overall financial and life goals when considering whether to refinance," he noted.