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By Giulia Carbonaro
Senior Reporter
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Mortgage rates dropped slightly over the past week, according to the latest data shared by Freddie Mac, but the much-awaited decline has delivered little relief to homebuyers struggling to get on the property ladder.
The dynamics unfolding across the U.S. show that lower mortgage rates may not be the easy fix to the housing affordability crisis that buyers are hoping for, experts told Newsweek.
Why It Matters
Historically high mortgage rates—now more than double what they were at their pandemic lows—have helped push many prospective homebuyers to the sidelines of the U.S. housing market. When the Federal Reserve began cutting rates in September 2024, many were hoping to see a corresponding drop in mortgage rates, which would have eased homebuyers' affordability issues.
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Several factors, especially growing uncertainty around the effects of the Trump administration's tariff policies on the U.S. economy, have kept the Fed from introducing new cuts that could further lower mortgage rates. Most experts expect mortgage rates not to budge significantly this year, meaning that buyers could shift their hopes toward other potential changes in the market, such as rising inventory, which may soon give them the upper hand over sellers.
What To Know
The Freddie Mac 30-year mortgage rate dipped by 4 basis points to 6.85 percent on Thursday from 6.89 percent the previous week, mirroring a drop in 10-year Treasury yields.
While the fall in mortgage rates is modest, this is still good news for homebuyers who are now facing monthly payments that are more than double what they were during the pandemic, when they hovered below 3 percent in 2020 and 2021. But the news isn't good enough to fix their affordability struggles.
"Rates are about 15 basis points lower than last year at this time. However, despite slightly lower borrowing costs, the affordability picture for prospective homebuyers has not improved because home prices are still rising," Lisa Sturtevant, the chief economist at Bright MLS, said in a statement shared with Newsweek.
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The National Association of Realtors (NAR) reported that the median price of an existing home sold in April was $414,000—the highest April median price on record.
"With a 6.86 percent interest rate on a 30-year fixed rate mortgage, a homebuyer would have a monthly payment of $2,980," Sturtevant said. "A year ago, when rates were 15 basis points higher and the median home price was $406,600, a buyer's monthly payment was $2,965."
So homebuyers can hardly rejoice at this week's news of slightly lower mortgage rates—especially as they are still facing historically high home prices and rising housing costs, including homeowners association (HOA) fees and home insurance premiums.
"Since 2019, the monthly payment on the median priced home has nearly doubled," Sturtevant said. "Over the same time period, average earnings have increased by just 30 percent," she added. "It would take a significant drop in interest rates—and a significant drop in home prices—to be back to 2019's affordability level."
What People Are Saying
Lisa Sturtevant, the chief economist at Bright MLS, said in a statement shared with Newsweek: "Some analysts are saying that to get the sluggish housing market moving, all we need is for mortgage rates to fall. But if home prices continue to rise, a drop in interest rates is not going to make much difference to a typical homebuyer. And a drop in rates certainly won't make much of a dent in affordability."
Jiayi Xu, an economist at Realtor.com, said in a statement shared with Newsweek: "The stubbornly high mortgage rates continue to weigh heavily on both buyer and seller activity during what's typically a busy season. Despite growing inventory and slower home sales, affordability remains a key challenge. More sellers are cutting prices, but high rates and elevated prices mean the income needed to buy a home is still well above pre-pandemic levels."
What Happens Next
Xu said significant mortgage rate drops this year were out of the picture. "Looking ahead, we do not anticipate a rate cut at the upcoming June [Federal Open Market Committee] meeting, as the U.S. economy continues to perform well," she said.
She added: "Inflation is gradually moving toward the Fed's 2 percent target, and the labor market remains healthy. But the real focus may fall on the release of updated economic projections and Chair [Jerome] Powell's post-meeting remarks, which could shed light on how the Fed is weighing growing uncertainties—especially with the tariff pause nearing its end.
"These insights may offer a clearer sense of the Fed's policy trajectory beyond the June decision."
Jessica Lautz, NAR's deputy chief economist, said in a recent statement that homebuyers should stop focusing so much on mortgage rates: "Regardless the reason, homebuyers waiting on the sidelines for rates to drop will likely be waiting a long time."
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