US Mortgage Rates Fall Below 6% Threshold for First Time Since 2022
Mortgage rates in the United States have dipped below 6 percent for the first time in more than three years, providing a psychological boost to the nation's battered housing market. However, economists caution that this relief may be short-lived, with market volatility rather than fundamental economic data driving the decline.
Rate Details and Market Context
The average rate on the popular 30-year fixed-rate mortgage fell to 5.98 percent this week, marking the lowest level since September 2022. This represents a decrease from 6.01 percent last week and a significant drop from the 6.76 percent average recorded during the same period a year ago. Meanwhile, the 15-year fixed mortgage averaged 5.44 percent, down from 5.94 percent a year ago.
These figures were released by Freddie Mac, the government-backed company that supports the US housing market through purchasing and guaranteeing mortgages. Sam Khater, Freddie Mac's chief economist, struck an optimistic tone, calling the drop a 'milestone' that could drive more potential buyers into the market for the spring homebuying season.
Economists Express Caution Amid Political Pressures
Jiayi Xu, an economist at Realtor.com, offered a more cautious perspective. 'As this week's decline stems from market volatility rather than fundamental economic data, more supportive economic data is needed to establish a consistent trend,' she said. Xu noted that the dip alone is unlikely to revive America's ailing housing market, where many prospective buyers remain priced out by elevated borrowing costs and stubbornly high home prices.
The housing market has become a hot-button political issue as President Donald Trump faces pressure to address cost-of-living concerns ahead of the November midterm elections. During his recent State of the Union address, Trump pointed to falling mortgage rates and his move to restrict institutional investors from buying single-family homes as signs that affordability is improving.
'And the annual cost of a typical new mortgage is down almost $5,000 just since I took office - one year,' Trump said, arguing that 'low interest rates will solve the Biden-created housing problem.' He credited declining borrowing costs for easing financial pressure on buyers while simultaneously stressing his desire to maintain rising home values for existing owners.
Market Dynamics and Psychological Impact
The recent rate drop followed a decline in the benchmark 10-year US Treasury yield after the US Supreme Court struck down President Trump's sweeping tariffs. In response, Trump imposed a 10 percent global tariff before raising it to 15 percent. The 30-year fixed-rate mortgage closely tracks the 10-year Treasury yield, making it sensitive to such policy developments.
Despite the psychological boost of rates falling below 6 percent, economists highlight persistent challenges:
- A chronic shortage of homes for sale, particularly starter homes
- The 'rate lock' effect where many homeowners hold mortgages below 5 percent, discouraging them from selling
- Inventory of previously owned homes remaining well below pre-pandemic levels
According to a July 2025 analysis by economists at the National Association of Realtors, a 30-year fixed-rate mortgage of 6 percent represents the 'magic number' that would make the median-priced home affordable for about 5.5 million additional households, including roughly 1.6 million renters. The group estimated that if the 30-year rate were to reach 6 percent, about 10 percent of those newly eligible households would likely purchase a home within the next 12 to 18 months, translating to roughly 550,000 additional homebuyers.
Industry Perspectives and Future Outlook
Bankers and market analysts suggest the psychological threshold of rates falling below 6 percent could encourage more sellers to list their homes and give buyers greater confidence as the typically busy spring season approaches. Mortgage refinancing activity has already picked up as rates have declined.
'That headline alone could prompt many sidelined buyers to take another peek at the housing market,' said Kara Ng, senior economist at Zillow.
Matt Vernon, head of consumer lending at Bank of America, noted that any market response is likely to be gradual. 'In many cases, life events drive decisions more than rates alone, but lower rates could be the nudge some buyers and current homeowners have been waiting for,' Vernon said, adding that mortgage application volumes at Bank of America are up nearly 22 percent year over year.
Government Intervention and Economic Skepticism
Last month, President Trump ordered the Federal Housing Finance Agency to purchase $200 billion in mortgage bonds in an effort to lower borrowing costs. House prices rose 1.8 percent in the 12 months through December after increasing 2.1 percent in November, according to the agency, which oversees mortgage finance giants Freddie Mac and Fannie Mae.
Minutes from the Federal Reserve's January policy meeting noted that the administration's bond-buying plans had caused 'a notable decline in mortgage-backed securities yields.' However, the minutes added that the move is unlikely to materially boost refinancing 'because current mortgage rates are well above the weighted average rate of outstanding mortgages.'
Economists remain skeptical that these purchases will significantly improve housing affordability, suggesting that while the psychological boost of rates falling below 6 percent is meaningful, sustained improvement will require broader economic support and inventory solutions.
