Mortgage interest rates dip under 6% for the first time in over three years

US Mortgage Rates Dip Below 6% for the First Time Since 2022

This aerial photograph, taken on August 8, 2025, shows a residential area in Las Vegas. The average mortgage rate this week stands at 5.98%, marking a notable decrease from rates seen at the beginning of last year. Photo credit: Justin Sullivan/Getty Images

Key Rate Milestone May Revive Buyer Interest

For the first time in years, average US mortgage rates have dropped below 6%, offering relief after a prolonged period of high borrowing costs that kept many potential buyers out of the market.

According to Freddie Mac, the average 30-year fixed mortgage rate fell to 5.98% on Thursday, a level not seen since 2022.

Market Dynamics Shift as Rates Fall

Many homeowners who locked in exceptionally low rates during the pandemic have been hesitant to sell, avoiding the prospect of higher payments. This reluctance has limited the number of homes for sale and kept prices elevated. However, with rates now starting with a "5," experts believe more buyers may return, potentially easing the inventory crunch caused by the so-called "lock-in effect."

Inventory Shows Signs of Improvement

Bhavesh Patel, an executive at Chase Home Lending, notes, "We're observing a stabilization and even a slight increase in housing inventory nationwide, suggesting that more homeowners are becoming comfortable with current rates and considering moves. In some regions, inventory has reached six months or more, which could create better opportunities for buyers."

Affordability Sees Modest Gains

Although mortgage rates remain higher than during the early pandemic years, the current average of 5.98% is a substantial improvement from the start of last year, when rates exceeded 7%.

Patel adds, "A quarter-point reduction in mortgage rates allows buyers to afford roughly 2.5% more home for the same monthly payment."

Buying Power on the Rise

Lower rates are already boosting what buyers can afford. A recent analysis found that the typical US household can now purchase a $331,483 home—over $30,000 more than last year. The study also revealed that about 82,300 additional homes are now within reach for median-income buyers compared to a year ago.

Kara Ng, senior economist at Zillow Home Loans, points out, "While buying power has increased by $30,000 since last year, rates below 6% could be a psychological trigger for many buyers who have been waiting on the sidelines. Round numbers matter, and seeing a rate in the 5% range could encourage renewed interest in the market."

Home Prices Remain High Despite Rate Relief

Still, some buyers may not feel much relief. Home prices have climbed about 50% since 2020 and remain near record highs. According to the National Association of Realtors, the median price for existing homes rose for the 31st consecutive month in January.

These price increases have significantly boosted the net worth of the two-thirds of Americans who own homes, while renters have not experienced similar gains.

Policy Perspectives and Homeowner Wealth

Although President Donald Trump has stated his intention to address housing affordability, he has also emphasized the importance of maintaining high home values. "We’re going to keep homeowners wealthy and support strong prices," he said last month.