Mortgage rates are at the lowest level in two months, but home buyers appear to be brushing it off.
The 30-year fixed-rate mortgage dropped to the lowest level of 2025, but it doesn’t seem enough to create urgency among prospective home buyers. Freddie Mac reports the 30-year fixed-rate mortgage averaged 6.76% this week.
Mortgage applications for a home purchase, however, were flat this week and pending home sales fell to a record low in January—both are gauges of buyer activity. Economists blame it on still-elevated mortgage rates and high home prices.
Home buyers might be adopting “a wait-and-see approach while considering the broader economy,” says Jessica Lautz, deputy chief economist at the National Association of REALTORS®.
So far, the temptation doesn’t appear to be there, even though this week’s 6.76% rate is the lowest rate for the 30-year fixed-mortgage in two months. However, the lower rate only equates to about a $60 monthly savings on a mortgage for a $400,000 home—a 20% decrease from when rates peaked recently at 7.04%, Lautz says.
“Is $60 a dealbreaker for someone purchasing a home? Perhaps not,” Lautz acknowledges. “However, it could influence a buyer’s financial perspective, shifting from the mid-6% range instead of 7%. Ultimately, vibes rather than data could prevail.”
Refusing to Budge: The Locked-in Homeowners
Eighty-three percent of homeowners with an outstanding mortgage currently have a sub-6% mortgage rate, and 55% have a mortgage rate under 4%, Danielle Hale, realtor.com®'s chief economist, said at a session during this week’s 2025 International Builders’ Show in Las Vegas. “Many existing homeowners are still feeling locked in,” timid to “trade-up costs by taking on a new mortgage at a much higher rate,” she says.
However, Hale does believe that will lessen over the next few months, with realtor.com® predicting that 75% of outstanding mortgages likely will have a sub-6% rate by the end of 2025. “Life happens and people will need to move due to job changes or family changes … this lock-in effect will gradually fade,” Hale says.
That shift may first be more prominent in the new-home market, with homeowners tempted by recent builder incentives, including buying down mortgage rates. Homeowners who have equity from rising home prices in their current home may be swayed to trade up into a new home for those builders who are willing to make the mortgage rate more attractive. “These incentives can help with desirability,” Ali Wolf, chief economist at Zonda, a real estate research firm, said at a session at the International Builders’ Show this week. “We have so many customers today that need financial support in order to have the math make sense."
For other prospective buyers, they will likely need to keep warming up to a new reality about the 30-year fixed-rate mortgage, with rates in the 6-7% range most of this year, said Robert Dietz, chief economist at the National Association of Home Builders, also said at the conference. “I’m not sure all buyers are there yet, but increasingly they will get used to it,” he said. “Buyers who are waiting for 4% rates…that is not going to happen. The new normal is the high 6% range,” at least for this year.
Mortgage Rate Averages This Week
Freddie Mac reports the following national averages with mortgage rates for the week ending Feb. 27:
- 30-year fixed-rate mortgages: averaged 6.76%, dropping from last week’s 6.85% average. A year ago, 30-year rates averaged 6.94%.
- 15-year fixed-rate mortgages: averaged 5.94%, dropping from last week’s 6.04% average. Last year at this time, 15-year rates averaged 6.26%.
At this week’s 6.76% rate, the monthly mortgage payment on a $400,000 home would be $2,078, assuming a 20% down payment. With a 10% down payment, the monthly mortgage payment would be $2,337, Lautz says.
Source: nar.realtor
