Housing News

The Wait Is Finally Over: Mortgage Rates Finally Drop Below 6%

Homebuyers and homeowners can finally exhale. Mortgage interest rates fell below 6% for the first time in three-and-a-half years just as the busy spring housing market kicks off.

Rates averaged 5.98% for 30-year, fixed-rate loans in the week ending Feb. 26, according to Freddie Mac data.

That is down a bit from 6.01% in the previous week and is a big drop from this time last year when rates were at 6.76%.

The last time mortgage rates were in the 5% range was in the first week of September in 2022, when they averaged 5.89%, according to Freddie Mac.

A mortgage rate with a five in front of it is likely to have a psychological effect on both homebuyers who have been sitting on the sidelines and homeowners who have been holding off on refinancing their existing loans. Many have been waiting for rates to fall into the 5s before making a move.

“This rate, combined with the improving availability of homes for sale, is meaningful and will drive more potential buyers into the market for spring homebuying season,” said Freddie Mac Chief Economist Sam Khater in a statement.

Someone buying a $400,000 home would save about $163 a month with rates down from 6.76% to 5.98%. (This assumes they put down 20% and does not factor in property taxes, insurance costs, or homeowner association fees.)

That adds up to nearly $2,000 a year and almost $59,000 over the life of a 30-year, fixed-rate loan.

Homeowners who took out mortgages when rates were nearing 8% could refinance their mortgages to enjoy steep savings as well.

For example, someone who got a home loan in late October of 2023, when rates averaged 7.79%, would save about $387 a month, nearly $4,650 a year, and roughly $139,000 over 30 years. (This assumes they bought a $400,000 home with 20% down.)

The timing of the mortgage rate dip is likely to give the housing market a boost.

“March is when the spring homebuying season typically begins to ramp up,” said Bright MLS Chief Economist Lisa Sturtevant in a statement. The multiple listing service covers the mid-Atlantic region.

“With rates at a three-and-a-half year low, it could be a barn burner of a spring homebuying season,” she said.