U.S. mortgage rates have slipped below 6% for the first time in nearly two years, marking a significant psychological milestone for homebuyers and homeowners alike. The average 30-year fixed mortgage now stands at 5.98%, according to the latest data from the Federal Home Loan Mortgage Corporation, widely known as Freddie Mac.
The last time rates hovered at similar levels was in September 2022. Since then, borrowing costs climbed sharply as the Federal Reserve tightened monetary policy to combat inflation, pushing mortgage rates to a peak of about 7.8% in October 2023. The recent decline offers a measure of relief to a housing market that has been constrained by elevated financing costs and limited inventory.
While the current rate remains far above the roughly 2.5% averages seen during the height of the pandemic, dipping under 6% carries emotional weight for consumers who have delayed buying or selling in hopes of more favorable terms.
Policy Shifts and Market Forces
Mortgage rates do not move in isolation. They are influenced by broader economic conditions, including bond yields, inflation expectations and decisions by the Federal Reserve. Over the past year, the central bank cut its benchmark interest rate three times, easing pressure on borrowing costs across the economy.
In addition, federal housing finance policy has played a role. Fannie Mae and Freddie Mac — government-sponsored enterprises that guarantee and package mortgages for investors — were directed to purchase $200 billion in mortgage-backed securities. That move injected additional demand into the secondary market, which can enable lenders to offer slightly lower rates to borrowers.
The drop to 5.98% is modest compared to prior pandemic-era lows, but it signals that financing conditions are gradually improving. Analysts caution that weekly fluctuations can occur and that rates remain sensitive to economic data and investor sentiment.
Buyers, Sellers and the Affordability Puzzle
The shift below 6% may prompt some hesitant buyers to reenter the market. Many prospective homeowners have postponed purchases, waiting for rates to ease. Others have stayed put, unwilling to trade their older, cheaper mortgages for significantly higher ones.
Recent figures from the Mortgage Bankers Association show that overall mortgage applications rose 2.8% week over week, largely driven by refinancing activity. Applications for home purchases, however, declined, suggesting that affordability challenges persist despite slightly improved borrowing terms.
Home prices remain elevated. The median U.S. home sold for $405,000 at the end of last year, according to data compiled by Realtor.com. Although higher rates over the past four years softened price growth in some markets, the fundamental imbalance between supply and demand continues to weigh on affordability.
Housing economists emphasize that without a meaningful increase in new construction or more existing homes listed for sale, even a modest drop in mortgage rates could reignite competition and drive prices upward again. Builders have expressed caution, citing high material costs and uncertainty in the construction sector. If demand strengthens faster than supply expands, the relief from lower mortgage rates could quickly be offset by rising home values, reshaping the affordability equation once more.
