Prospective homebuyers may finally be getting some relief as the average interest rate on a 30-year fixed mortgage has fallen for the third straight week. According to Freddie Mac, the current average rate now stands at 6.89%, down from 6.95% last week.
Although this decline offers a slight boost to the housing market, mortgage rates remain significantly higher than the 6.64% average recorded this time last year. The dip could encourage buyers and refinancers to act before rates potentially climb again.
Why Are Mortgage Rates Falling?
Mortgage rates are closely tied to movements in the bond market, particularly the 10-year Treasury yield, which has declined in recent weeks.
Additionally, while the Federal Reserve has not made any immediate changes to interest rates, its more cautious approach to rate hikes has contributed to a slight easing in borrowing costs.
Despite this recent drop, economists caution that rates are expected to stay above 6% throughout 2025, making home affordability a continuing challenge for many Americans.
How Mortgage Rates Impact Homebuyers
The ongoing fluctuations in mortgage rates have had a significant impact on the U.S. housing market, which has been struggling since rates began rising in 2022.
- Higher mortgage costs have made it harder for buyers to afford homes, slowing sales nationwide.
- 2024 marked the worst year for home sales in nearly 30 years, with low inventory and high prices discouraging many buyers.
- Pending home sales data suggests that unless rates drop further, demand may continue to stagnate in 2025.
Real estate experts say that while any drop in rates is good news, today’s mortgage rates are still well above the historic lows seen in 2020 and 2021 when many homeowners secured rates below 3%.
What Should Homebuyers Do?
With mortgage rates showing some signs of decline, buyers should stay alert for the best opportunities to lock in a favourable rate. Financial experts recommend:
✔ Monitoring interest rate trends to identify the right time to buy or refinance.
✔ Getting pre-approved for a mortgage to secure current rates before any increases.
✔ Considering adjustable-rate mortgages (ARMs) for potentially lower initial payments.
If rates continue their downward trend, more buyers may return to the market, which could drive up demand and home prices once again.
Final Thoughts
While the latest mortgage rate dip offers some relief, experts caution that affordability challenges remain. Prospective homebuyers should stay informed and work with lenders to explore the best options in this unpredictable housing market.
