US mortgage rates fell last week to the lowest level since September 2024, a hopeful sign for the sluggish housing market to start the new year.

The contract rate on a 30-year mortgage dropped 7 basis points to 6.25% in the week ended Jan. 2, which included New Year's Day, according to Mortgage Bankers Association data released Wednesday. The rate on a 30-year jumbo mortgage, which is used to finance purchases of more expensive homes, fell to 6.32%, the lowest since April 2023.

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The figures are encouraging for a housing market that's been hamstrung by affordability constraints in recent years. Contract signings have now picked up for four straight months, according to the National Association of Realtors, pointing to building momentum for sales going into the new year.

Despite the decline in borrowing costs, MBA's purchase index fell a seasonally adjusted 6.2% last week. That said, it's typical to see less buyer interest and greater volatility around year-end holidays. The refinancing gauge, however, rose an adjusted 7.4%.

The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.