US Mortgage Rates Drop Below 7% for First Time This Month – Is Now the Time to Buy?

According to Freddie Mac, the average rate for a 30-year fixed mortgage in the United States has dipped to 6.85%, marking its first decline in a month.

This market drop marks a key point for real estate investors as mortgage rates fall below the 7% threshold for the first time since mid-January.

Although modest, most buyers and realtors didn't anticipate the decrease, which has thus sparked discussions about whether it's an opportune moment for prospective homebuyers to enter the market.

'None of the old rules apply anymore, so while forecasters try and look back and try and predict the future based on what happened in the past, those past relationships don't always hold true in the current environment,' said Lisa Sturtevant, chief economist at Bright MLS, in a statement. For her, 'that means we should expect the unexpected in the 2025 housing market.'

A Welcome Relief Amidst High Borrowing Costs

The slight drop in mortgage rates is attributed to easing Treasury yields and shifting market expectations.

Samir Dedhia of One Real Mortgage noted that this decline presents a potential opportunity for homebuyers and those considering refinancing.

He explained that 'as uncertainty lingers, investors are shifting toward bonds as a safe haven, helping to push mortgage rates lower.' While these rate improvements may offer some relief to buyers, Dedhia cautioned that 'market volatility is expected to persist in the coming months as economic policies and data continue to influence investor sentiment.'

However, it's important to note that borrowing costs remain historically high, continuing to impact homebuying affordability. The 15-year fixed-rate mortgage also saw a decrease to 5.99%.

Persistent Affordability Challenges

Despite the dip in rates, affordability challenges persist due to soaring home prices. The median price of an existing home reached a record $414,000 in April, constraining buyer access even as inventory rises.

Inventory was up 31.5% for single-family homes and 28.1% for townhouse-condo properties in May, leading to increased competition and more price cuts, particularly in the West. Lisa Sturtevant, mentioned earlier, pointed out that without a corresponding drop in home prices, lower mortgage rates may have a limited impact on overall affordability for buyers.

Lisa noted that although mortgage rates have declined, the 'affordability picture for prospective homebuyers has not improved because home prices are still rising.'

Market Outlook and Buyer Considerations

Economists predict continued volatility in mortgage rates for the remainder of 2025, expecting them to stay between 6% and 7%. Goldman Sachs has adjusted its forecast, now expecting the 30-year mortgage rate to reach 6.75% by year-end, up from a previous prediction of 6.1%, reflecting persistent inflation and high Treasury yields.

For potential buyers, this environment suggests a need for careful consideration. While the recent dip in rates offers some relief, the combination of high home prices and the possibility of rates remaining elevated means that affordability challenges are likely to persist.

Prospective buyers should assess their financial situation, consider the potential for future rate fluctuations, and consult with financial advisors to determine the best course of action.

In sum, while the dip below 7% in mortgage rates is a positive development, it does not necessarily signal a significant shift in the housing market. Affordability remains a key concern, and buyers should proceed cautiously, keeping an eye on interest rates and home price trends.

Originally published on IBTimes UK