Mortgage rates slip, but 6% may be the limit

Mortgage rates dropped for the first time in three weeks but have remained in the same range for the past month.

The 30-year fixed-rate mortgage averaged 6.09% Thursday, down two basis points from 6.11% last week, according to the Freddie Mac Primary Mortgage Market Survey. The 30-year rate was 6.87% at this time a year ago, the start of its descent from 7% to nearly 6%.

Meanwhile, the 15-year fixed-rate mortgage averaged 5.44%, a drop of six basis points from 5.5% last week. It also fell 65 basis points from the same week last year.

"Bolstered by strong economic growth, a solid labor market and mortgage rates at three-year lows, housing affordability continues to measurably improve," said Sam Khater, Freddie Mac's chief economist, in a press release Thursday. "These factors have caught the attention of many prospective homebuyers, driving purchase application activity higher than a year ago."

Mortgage applications decreased fairly significantly over the past three weeks, but were still up on a year-over-year basis as of last week. Purchase applications were 4% higher than the same week a year ago, while refinance applications were up 101%, as refinancing boomed in January.

Affordability hit a four-year high last month, following rate and home prices drops. While affordability has improved, it remains below historical averages, as the national home price-to-income ratio sits at 4.8:1, compared with the long-run average near 4:1.

"Even small reductions toward 6% rates can significantly boost affordability, particularly for homeowners who could refinance into a lower rate and monthly payments," said Andy Walden, head of mortgage and housing market research at ICE, in a press release Monday.

The 10-year Treasury yield, one of the benchmarks used in pricing the 30-year fixed-rate mortgage, has plummeted over the past week, reaching its lowest level since the end of last year. It closed at 4.172% Wednesday and dropped to 4.121% as of 11:30 a.m. on Thursday, despite the unemployment rate falling in January.

A mixed bag of economic data during the past seven days drove volatility in the treasury yield, said Zillow Home Loans Senior Economist Kara Ng.

"Weaker-than-expected retail sales put modest downward pressure on interest rates, while a stronger-than-expected employment report from the Bureau of Labor Statistics nudged rates slightly higher," Ng said in a Wednesday evening commentary. "On net, the 30-year fixed mortgage rate ended the week just below its 2025 lows."

What's next for mortgage rates?

While mortgage rates have been hovering around 6% for the last month, this may be as low as they go.

"Mortgage rates are at their lowest levels since 2022. That's mainly because inflation has eased and the job market has cooled. But mortgage rates seem unlikely to push below the 6% level in the near future," said Jeff Ostrowski, Bankrate's housing market analyst.

Friday's Consumer Price Index release is likely the next driver of mortgage rate movements, Ng said.

"Inflation is still higher than the Fed's 2% target, which limits how much the Fed could potentially cut its benchmark rate," Ng said. "However, the Federal Reserve has emphasized that service inflation has softened, including shelter, and elevated readings are largely from tariff-impacted goods."