Mortgage Rates Drop to Their Lowest Level in 2 Months, Upping Purchasing Power and Giving Homebuyers Window of Opportunity

The increase in purchasing power is modest, but along with a pileup of housing supply in some parts of the country, it marks an opportunity for buyers. 

A homebuyer on a $3,000 monthly budget can afford a $446,000 home with a 6.9% mortgage rate, roughly the daily average on February 21. That’s the lowest daily average mortgage rate since mid-December. 

The decline in rates is giving homebuyers a bit more purchasing power. In the last nine days alone, a buyer on a $3,000 budget has gained $7,000 in purchasing power, as rates fell from 7.13% to 6.89%.  That buyer could have purchased a $439,000 home with a 7.1% rate, roughly the average on February 12.

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To look at affordability another way, the monthly mortgage payment on the median-priced U.S. home, which goes for roughly $420,000, is $2,760 with today’s average mortgage rate. Two weeks ago, the payment would have been $2,814. 

While the mortgage-rate decline is small and the uptick in purchasing power is modest, they’re notable because Redfin economists expect mortgage rates to remain elevated in the high-6% to low-7% range throughout the year. That means rates dropping to 6.89%, their lowest level in two months, is an opportunity for buyers to lock in a comparatively low rate. 

“House hunters who have been waiting on the sidelines, hoping for rates to come down, may want to act quickly while rates are below 7%,” said Redfin Economic Research Lead Chen Zhao. “The economic and political uncertainty in the air means rates could easily rebound to over 7% next week or next month. The window of opportunity for buyers looks even brighter when you consider that the supply of homes for sale nationwide is piling up, giving some buyers power to negotiate on sale price and terms.”

It’s worth noting that even though rates have come down a bit over the last few weeks, housing costs are still near record highs. And while buyers have some negotiating power in certain parts of the country, that’s not necessarily the case in West Coast and Northeast markets, where supply remains constrained. 

Mortgage rates are coming down due to fears that some of the Trump administration’s policies, such as tighter immigration policies, tariffs, and layoffs across the federal government–will reduce economic growth.

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