Mortgage borrowing costs are easing, but only gradually

Homebuyers have gotten a bit of breathing room in recent weeks, even though mortgage rates are still stuck above 7%.

For some time, it appeared mortgage rates might keep rising without pause. Instead, they have now declined for two straight weeks, reaching their lowest point in more than a month and offering borrowers at least modest relief.

This week, the average 30-year fixed mortgage rate stood at 7.24%, according to Freddie Mac’s latest figures. That is still far above what many buyers would like to see and remains well above where the year began.

Even so, the recent slide is “a step in the right direction” for the mortgage market, said Jessica Eddy, senior mortgage planner at Edge Home Finance.

She told Mortgage Professional America that although rates are still more than a percentage point higher than they were a year ago, there are reasons to stay upbeat.

“What keeps me optimistic is that we’ve come off the peak and today’s rates are still below the 50-year average of about 7.7%,” she said. “The market is cyclical. Buyers are still moving when the payment and the overall terms work.”

Could affordability improve in the months ahead?

First American chief economist Mark Fleming also pointed to possible relief for homebuyers in the company’s latest Real House Price Index (RHPI).

He said household income growth is expected to outpace home price increases in 2027, which could help improve affordability for many buyers. “When income growth exceeds house price growth, house-buying power improves – even if mortgage rates don’t decline meaningfully,” he said.

That could matter in markets where buyers have been squeezed out not only by higher borrowing costs, but also by persistent price gains. If wages keep rising, some of the affordability gap could narrow without much movement in mortgage rates.

Eddy said her advice depends on the client, but the main message stays the same: focus on the monthly payment you can comfortably manage instead of trying to time the market.

“If the payment works today, waiting for a rate that may not come will cost you the house,” she said. “For the most part we are in a buyer’s market, which means we are seeing price reductions, seller concessions with temporary rate buydowns, the ability to get an inspection, et cetera. All of these can help offset the higher rate.”

For clients who are not ready to buy yet, she recommends taking a longer-term approach.

“If a buyer is not quite ready to move forward with purchasing, we are making a plan covering credit, downpayment, budget, and so on. I also encourage them not to let a Fed headline drive a housing decision,” she said.

Fed meetings still dominate the conversation

The central bank kept interest rates unchanged after its latest meeting. While those decisions do not directly set mortgage rates, lenders and market professionals say they spend a lot of time explaining that distinction to clients.

Some prominent mortgage watchers, including MBS Highway chief executive Barry Habib, say mortgage rates could even fall if the Fed keeps raising rates, since tighter policy could slow the economy and inflation and push bond yields lower.

Buyers who need to move for practical reasons, such as expanding families or job relocations, are still proceeding in the current market. Others are holding back for different reasons.

“The people sitting out are usually stuck on one of three things: the payment feels too high, their credit or downpayment needs a plan, or they’re listening to the headlines and getting scared,” Eddy said.

“All three are fixable once someone runs their numbers and breaks down their options so that they can make an informed decision. That’s the conversation I’m having every day. For buyers who are ready, this is a real opportunity to take advantage of the market.”