Mortgage Rates Drop Below 6% for First Time Since 2022, Boosting Homebuyer Purchasing Power

Mortgage rates in the United States have dropped below a key psychological threshold, potentially giving the housing market a much-needed boost.

According to Freddie Mac, the average 30-year fixed mortgage rate fell to 5.98% this week — the first time rates have dipped below 6% since 2022. The decline marks a significant improvement from early last year, when borrowing costs hovered above 7%.

Lower rates could help bring more buyers back into the market after years of high borrowing costs kept many sidelined. Analysts say the shift may also ease the so-called “lock-in effect,” where homeowners who secured ultra-low pandemic-era rates have been reluctant to sell.

Experts say even small changes in interest rates can have a big impact. A quarter-point drop can allow buyers to afford roughly 2.5% more home while keeping the same monthly payment.

Research from Zillow suggests affordability is already improving. The median-income U.S. household can now afford a home priced around $331,483 — more than $30,000 higher than last year — with tens of thousands more properties now within reach.

Still, affordability challenges remain. Home prices have climbed roughly 50% since 2020 and remain near record highs. The median price for existing homes rose again in January, marking the 31st consecutive monthly increase, according to National Association of Realtors.

While lower mortgage rates may encourage more activity, economists say many buyers will continue weighing elevated home prices against improving borrowing conditions.

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