Since January 2025, mortgage rates in the United States have been steadily declining but still remain at a high enough level to put pressure on potential buyers. Experts in the real estate industry predict that this rate may stay around 6% in the high range during the spring.
According to data released by Freddie Mac, as of the week ending February 12, the average rate for a 30-year fixed-rate mortgage had dropped to 6.87%, marking the fourth consecutive week of decline.
Sam Khater, the Chief Economist at Freddie Mac, mentioned that this rate has reached the “lowest level since the beginning of 2025.”
He stated, “The recent pullback in mortgage rates is benefiting potential buyers, and compared to the same period last year, current home buying demand has become stronger. This indicates that the real estate market may be on the brink of a resurgence in buyer activity.”
Despite the four weeks of consecutive rate decreases, the 30-year mortgage rate is still close to 7%, posing pressure on buyers. Approximately four years ago, this rate was below 3%.
Lisa Sturtevant, Chief Economist at Bright MLS, advised in a comment on February 13 that buyers should not try to “time the bottom” to get the lowest rate.
She said, “Instead, buyers should ensure their financial situation is stable before beginning the house-hunting process. Additionally, they should compare loan options from multiple sources to find the best rate and terms for them.”
She also cautioned that mortgage rates could fluctuate in the coming weeks, potentially leading to an unpredictable spring real estate market. Despite a significant pent-up demand in the market, inflation and economic uncertainty could still be potential impediments.
According to the U.S. Bureau of Labor Statistics, the 12-month inflation rate reached 3% as of January, higher than the previous December, marking the fourth consecutive month of increase.
The unexpectedly high inflation data suggests that the Federal Reserve may slow down the pace of rate cuts, with the next rate cut potentially not occurring until summer. It is anticipated that mortgage rates may remain in the high 6% range during the spring.
A recent survey by Fannie Mae showed a decrease of 13 percentage points in consumers’ expectations of mortgage rate decreases in the next 12 months. This shift contrasts sharply with the optimism in the market during the second half of last year about imminent rate cuts.
Kim Betancourt, Vice President of Economics and Strategic Research at Fannie Mae, commented that the decline in consumers’ optimism about mortgage rates was not surprising, as the rates remain stubbornly high.
The trend of rising rather than falling mortgage rates has led to a “lock-in effect,” where homeowners who purchased during the low-rate period are reluctant to sell their properties since they may need to buy a new property at a higher rate once they sell.
However, according to the latest report from real estate brokerage firm Redfin, more homeowners are being forced to sell their properties due to significant life events such as divorces or job changes, regardless of their previous low mortgage rates. This has been gradually weakening the “lock-in effect.”
Local real estate agent David Palmer from Redfin Premier commented, “In Seattle, the ‘lock-in effect’ on rates has eased somewhat. Although homeowners are reluctant to give up their 2% to 3% mortgage rates, life goes on, and sometimes people have to make moving decisions.”
Additionally, other factors contributing to the weakening of the “lock-in effect” include a growing belief among many Americans that mortgage rates will not return to the lows seen during the pandemic. Furthermore, with housing prices having significantly risen since the pandemic, many homeowners have seen a substantial increase in their property equity, giving them the ability to sell and buy despite facing higher interest rates. This situation is particularly relevant for homeowners planning to move to cheaper areas or downsize their homes.
The fluctuations in mortgage rates are greatly influenced by the Federal Reserve’s benchmark rate. Over the past several months, the Fed has lowered the benchmark rate to a range of 4.25% to 4.5%.
Despite expectations from investors for further rate cuts, the Fed indicated in December last year that the number of rate cuts this year may be fewer than anticipated due to ongoing inflation concerns.
Recently, Federal Reserve Chair Jerome Powell reiterated this stance while testifying before the Senate Banking Committee.
Powell stated, “Our current policy stance is much more accommodative than before, the economy is still strong, and we do not need to rush towards policy adjustments.”
On February 12, U.S. President Donald Trump took to social media calling for lower interest rates, stating that it is in line with the upcoming tariffs.
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