Most Mortgages Hold Rates Below 6%
About a third of mortgages have interest rates between 3-4%, 18% between 4-5%, 9.9% between 5-6% and 18% at 6% or higher, according to a new study.
New York – In January, mortgage interest rates hit 7.04%, after climbing through most of the fourth quarter of 2024, but rates have since fallen to the high 6% range, according to a Realtor.com study.
Potential home sellers remain “locked in” to lower rates, and their unwillingness to sell is limited by housing inventory. Mortgage interest rates have been above 6% since September 2022. Although home supply has improved over the past 12 months, inventory is still below pre-pandemic levels, increasing competition among buyers and pushing home prices higher.
The housing supply has seen a surge in new construction, with the share of new homes in inventory higher than pre-pandemic levels. As a result, new home sales have risen annually for most months of the past two years.
In July 2020, the mortgage interest rate on a 30-year fixed-rate loan was below 3%, and it remained there until September 2021. As of the third quarter of 2024, 20.9% of mortgages have an interest rate below 3%.
About a third (33.2%) of mortgages have interest rates between 3% and 4%, while 18% have rates between 4% and 5%. Also, 9.9% of existing mortgages have rates between 5% and 6%, while 18% have rates of 6% or higher.
Overall, more than 50% of all mortgages are at 4% or lower, and nearly three-quarters are at 5% or lower. By the end of 2025, the share of mortgages with interest rates below 6% could fall to 75% of all outstanding loans.
A recent survey also found that 40% of potential buyers would consider buying a home if mortgage rates were below 6% and 32% said they would buy a home if interest rates were below 5%.
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