U.S. Mortgage Rates Hit Lowest Level in 3 Years | Housing Market Outlook
Falling mortgage rates could make homes affordable for millions—experts weigh in on what buyers should do next.
The National Association of Realtors (NAR) has reported that U.S. mortgage rates have fallen to their lowest point in three years. After exceeding 7% earlier this year, rates began to decline in September, reaching 6.13%.
According to NAR’s July report, if rates fall below 6%, nearly 5.5 million additional households—including 1.6 million renters—could afford mid-priced homes. The agency noted that around 10% of those households are likely to purchase a home within the next 12 to 18 months.
Mortgage giant Fannie Mae forecasts that rates will fall below 6% within the next 14 months, stabilizing at 6.4% in 2025 and dropping to 5.9% by the end of 2026. Danielle Hale, chief economist at Realtor.com, agreed, suggesting that mortgage rates could remain around 6% through 2026. She pointed out that a similar dip occurred in September 2024, when rates fell to 6.1%.
Mortgage Rates Fall but Housing Demand Heats Up
While many consumers expected the Federal Reserve’s September 17 rate cut to drive housing prices lower, mortgage rates in fact rose slightly from 6.26% on September 18 to 6.30% on September 25. Analysts attribute this to the strong link between mortgage rates and 10-year Treasury yields, which have remained above 4% since October 2024—making it difficult for mortgage rates to dip significantly below 6%.
Still, today’s average mortgage rate is notably lower than the 7.04% peak seen in mid-January. For example, on a $300,000 30-year loan, the 0.74% drop translates to roughly $150 in monthly savings.
Housing Market Gains Momentum as Buyers Face Rising Competition
The downward trend has already energized the housing market. NAR’s pending home sales report showed a 4% increase in sales between July and August, coinciding with mortgage rates dropping from 6.75% to 6.56%.
However, Hale cautioned against waiting too long for rates to decline further, warning that rising demand could drive up competition and home prices. “It makes sense to act before the surge,” she advised, noting that the upcoming mortgage season typically offers buyers the best opportunities due to lower competition.
For those seeking better deals, Hale suggested exploring newly built homes, as builders often provide incentives such as reduced interest rates during the first year or two to attract buyers quickly.
