Home Loan Rates Drop Below 6% for First Time Since 2022

Mortgage rates for 30-year home loans have fallen below 6% this week, marking the lowest level in over three years. However, housing experts warn that limited home inventory remains the bigger obstacle for Delaware homebuyers looking to enter the market.

For the first time in more than three years, mortgage rates on 30-year home loans have dropped below the 6% mark, offering some relief to potential homebuyers across Delaware and the region.

According to mortgage giant Freddie Mac’s Thursday report, rates on 30-year fixed mortgages now average 5.98%, down from 6.01% the previous week. This represents the most affordable borrowing costs since September 2022, when compared to the 6.76% average from the same week last year.

The rate decline came after the 10-year U.S. Treasury yield dropped following last Friday’s Supreme Court decision that overturned President Donald Trump’s emergency tariff measures. Trump quickly responded by implementing a 10% global tariff for 150 days, later increasing it to 15% over the weekend. Since mortgage rates typically follow Treasury yields, this market uncertainty created downward pressure on borrowing costs.

“This legal tug-of-war has triggered a flight to safety among investors, pushing bond prices higher and yields lower, helping mortgage rates settle around 6%,” explained Jiayi Xu, an economist with Realtor.com. “However, as this week’s decline stems from market volatility rather than fundamental economic data, more supportive economic data is needed to establish a consistent trend.”

The Trump administration has also directed the Federal Housing Finance Agency, which supervises Freddie Mac and Fannie Mae, to buy $200 billion worth of bonds from these mortgage companies to help reduce home loan costs.

Meanwhile, 15-year mortgage rates moved in the opposite direction, climbing to 5.44% from the previous week’s 5.35%, though still below last year’s 5.94% average for the same period.

Despite the improved rates, housing economists remain doubtful that lower borrowing costs alone will solve affordability challenges for Delaware families and other homebuyers.

Federal Reserve meeting minutes from January 27-28, released last week, revealed that a New York Fed official noted the administration’s mortgage bond purchasing plans had reduced mortgage-backed securities yields compared to similar Treasury yields. However, the official “observed that the decline was unlikely to result in a material increase in mortgage refinancing because current mortgage rates are well above the weighted average rate of outstanding mortgages,” according to the minutes.

Housing market experts point to limited home inventory as the primary barrier facing buyers. The number of existing homes available for purchase remains significantly lower than pre-pandemic levels. Many current homeowners are reluctant to sell because they secured mortgages with rates below 5%, creating what industry professionals call a “rate-lock” situation.

While housing supply showed some improvement last year, that progress has recently stalled. Real estate professionals report that some homeowners are removing their properties from the market due to declining prices. The Federal Housing Finance Agency reported Tuesday that home prices rose 1.8% over the 12 months ending in December, down from November’s 2.1% increase.

Industry analysts and trade organizations suggest that the current administration’s trade and immigration policies have made construction more expensive by raising costs for building materials and appliances while reducing available workers. These factors, combined with scarce building lots due to state and local regulations, are limiting builders’ capacity to start new single-family home projects.

Nevertheless, the drop in 30-year mortgage rates could motivate some hesitant sellers to list their homes and attract potential buyers back to the market.

“While buying power has already increased $30,000 from last year, mortgage rates below 6% could be an important psychological threshold,” said Kara Ng, senior economist at Zillow. “Round numbers matter, and that headline alone could prompt many sidelined buyers to take another peek at the housing market.”

The rate improvements come as Trump faces political pressure to address rising costs, including housing expenses, ahead of challenging midterm elections where Republicans are fighting to maintain Congressional control.