Mortgage interest rates have reached their lowest point of 2025, but they remain high enough to limit home buying and selling activity. As of Feb. 6, 30-year fixed-rate mortgages averaged 6.89%, according to Freddie Mac. However, this still leaves many households struggling to afford mortgage payments.
To put this into perspective, a $2,395 monthly payment would require 33.5% of the median household income. This is a decrease from a recent peak in October 2023, when rates were higher and monthly payments were even more burdensome.
High interest rates are not only affecting first-time buyers but also current homeowners who may be considering moving up or down to a different area or selling their home altogether. Many people prefer to stay put due to the “lock-in effect,” where they would face higher interest rates if they sold and bought again at a later date.
The US housing market is facing severe shortages, with estimates suggesting over 4 million homes are in short supply. Despite this, demand remains strong, with mortgage applications on par with those in 2024, despite high interest rates. Experts predict that rates will remain relatively stable, with forecasts suggesting 6.5% by year-end.
As time passes, the lock-in effect is expected to ease as people move due to life changes or growing acceptance of long-term interest rates. Additionally, many households now hold significant home equity, making it worthwhile for some to consider moving on. With median home prices rising nearly 50% in five years, this division between homeowners and would-be buyers continues to exacerbate the housing market’s challenges.
Source: https://eu.usatoday.com/story/money/personalfinance/real-estate/2025/02/06/mortgage-rates-down-still-too-high/78248904007