Mortgage Rates Today: 30-Year Refinance Rate Goes Down by 5 Basis Points

Are you thinking about refinancing your mortgage? Then you'll want to pay attention: Today's average 30-year fixed refinance rate has decreased slightly, dropping 5 basis points to an average of 7.03%, as of October 2, 2025, according to data from Zillow. While this might seem like a small change, it's part of a larger picture that could signal further shifts in the mortgage market. Let's dive into what this means for you.

Mortgage Rates Today: 30-Year Refinance Rate Goes Down by 5 Basis Points

A Quick Breakdown of Current Rates

Before we get too excited about that slight dip, let's get a clearer understanding of where mortgage rates stand right now. Here's a quick breakdown from Zillow's latest report:

• 30-year fixed refinance rate: 6.98% (Up 3 basis points from yesterday)
• The 30-year fixed refinance rate on October 2, 2025 is down 5 basis points from the previous week's average rate of 7.03%.
• 15-year fixed refinance rate: 5.84% (Up 13 basis points)
• 5-year ARM refinance rate: 7.35% (Up 19 basis points)
• Data as of October 2, 2025

You'll notice that while the 30-year rate saw a small decrease compared to last week, the other rates have increased. This mixed bag highlights the volatility of the market and the many factors influencing mortgage rates.

The Fed's Role: A Recent Rate Cut

We need to understand the bigger economic picture, so lets talk about the Federal Reserve (the Fed). They play a huge role in setting the tone for interest rates. On September 17, 2025, the Fed took a significant step by cutting its benchmark interest rate by a quarter of a percentage point, moving the target range to 4.0% to 4.25%. This was the first cut after a pause.

How does the Fed affect Mortgage Rates?

I know, it can seem confusing, but here's the basic connection:

1. The Fed controls short-term interest rates. When the Fed lowers its rate, it becomes less expensive for banks to borrow money.
2. This impacts Treasury yields: The 10-year U.S. Treasury yield is a crucial benchmark for 30-year fixed-rate mortgages.
3. Mortgage rates follow: Lenders base their mortgage rates on the 10-year Treasury yield, typically charging a premium (called a “spread”) to cover their risk and costs.

Treasury Yields and Mortgage Rates: A Closer Look

Currently the :

• 10-Year Treasury Yield: 4.12% (as of October 1, 2025)

The Mechanics of the Relationship

Here is how it works

• Direct Benchmark: Lenders use the 10-year yield as a baseline for pricing 30-year mortgages because the average homeowner holds a loan for a similar duration.
• Investor Competition: To attract investors, mortgage-backed securities must offer a competitive return compared to ultra-safe Treasury bonds.

The “Spread” Problem: Why Rates Haven't Plunged

Here's where things get a little tricky. While the Fed's rate cut has pushed Treasury yields down, mortgage rates haven't fallen as dramatically. This is due to what's called the “spread” – the difference between the 10-year Treasury yield and mortgage rates.

Understanding the “Spread”

Historically, this spread has been around 1 to 2 percentage points. However, recently it has widened, exceeding 2 percentage points. This widening spread is keeping mortgage rates higher than they would otherwise be, even with lower Treasury yields.

Why is the Spread so Wide?

Several factors could contribute to this:

• Uncertainty:
• Market Volatility:
• Demand and Capacity:

What Does This Mean for You?

So, let's boil it down what this all means based on your situation:

• For prospective buyers: Even modestly decreased mortgage rates enhance affordability.
• For sellers: The decline in rates may encourage some “rate-locked” homeowners to list their properties, potentially boosting inventory.

Looking Ahead: Will Rates Continue to Drop?

Predicting the future is always difficult, especially when dealing with the economy. However, here are a few things to watch:

• Inflation Numbers: The next few inflation reports(PCE and CPI Readings) will be crucial.
• Labor Market:
• The Spread:

For now, the sustained lower Treasury yield is a welcome sign, but remember that the wide spread indicates that lenders and investors are still pricing in risk. Therefore, mortgage rates will likely remain high relative to where treasury yield is.

Bottom Line: If you're a fence-sitter, now might be the time to seriously explore your options. Being prepared will put you in a better position to act quickly if rates become more favorable.