U.S. Mortgage Rates Drop, But Buying a Home Still Isn’t Easy

Mortgage rates have been falling recently, giving potential homebuyers a bit of relief as the spring season begins. However, economic uncertainty and stubbornly high inflation mean rates may not drop much further anytime soon.

The average 30-year mortgage rate in the U.S. has fallen for six straight weeks, landing at 6.76% last week—down from 7.04% in mid-January, according to Freddie Mac. While this is the lowest rate since December 19, it’s still more than double the record low of 2.65% seen four years ago.

Mortgage rates depend on several factors, including inflation trends, the Federal Reserve’s interest rate decisions, and investor demand for U.S. Treasury bonds. Recently, rates have followed the decline in the 10-year Treasury yield, which has dropped from 4.79% in mid-January due to concerns about economic growth and potential impacts of new trade tariffs.

While lower rates can make buying a home more affordable, future trends remain unpredictable. Trade tariffs could increase inflation, pushing Treasury yields—and mortgage rates—back up. The Federal Reserve is also monitoring inflation and could adjust policies accordingly, which may affect rates.

Despite lower rates, home sales haven’t picked up significantly. Sales of existing homes fell in January, as high prices and mortgage rates continued to keep many buyers out of the market. Pending home sales, which indicate future purchases, hit a record low that month, suggesting further declines ahead.

However, mortgage applications surged last week, jumping 20.4% overall, with refinancing applications rising 37%, according to the Mortgage Bankers Association. While this increase is typical for the season, it shows that some buyers are acting while rates are lower.

This rate drop comes at a time when the number of homes for sale has increased compared to last year, and price growth is slowing. In some cities—such as Austin, Dallas, and Tampa—prices are even declining, making homeownership more accessible for some.

Still, the economic outlook and job market conditions will play a big role in buyers' decisions. "Inflation is still a concern, and now the economy is showing signs of slowing," said Daryl Fairweather, chief economist at Redfin. "This combination might make some buyers hesitate before entering the market."

While lower mortgage rates are a welcome change, challenges remain. Homebuyers should stay informed and consider all financial factors before making a move in the current housing market.

Also Read: 5 Florida Cities Where Buying Property Could Be a Costly Mistake