Mortgage Rates Drop Ahead Of Spring Homebuying Season: Will Consumers Take The Plunge?

Mortgage rates have experienced a notable decline as the spring home-buying season begins, according to the latest data from Freddie Mac.

What To Know: The 30-year fixed-rate mortgage (FRM) dropped to 6.63% as of Tuesday, down from 6.76% the previous week, marking the largest weekly decrease since mid-September 2024. This drop boosts homebuyers’ purchasing power and could encourage more market activity, including an increase in refinancing.

The refinance share of mortgage applications surged to nearly 44%, the highest since mid-December 2024. The 15-year FRM also decreased to 5.79%, offering additional savings for prospective buyers and homeowners looking to refinance.

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What Consumers Have To Say: With mortgage rates remaining elevated compared to pre-pandemic levels, U.S. homeowners are recalibrating their expectations, according to the latest ResiClub Housing Sentiment Survey conducted between Feb. 21 and March 4.

The survey, which polled 650 adults, found that potential homebuyers are gradually becoming more accepting of elevated borrowing costs, though affordability concerns remain a significant constraint.

Only 16% of homeowners surveyed said they would accept a mortgage rate of 7.00% on their next home purchase, while just 7% would go as high as 7.50% or more. However, a majority (54%) of respondents indicated they could accept a rate up to 5.50%, and 41% would stretch to 6.00%.

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These figures highlight a critical shift: while many homeowners were previously anchored to historically low mortgage rates below 4.00%, an increasing share now acknowledges that such rates are unlikely to return soon.

What Else: Despite this growing tolerance, affordability remains a roadblock. Many potential sellers who would need to buy again have realized they are effectively locked in, unable to justify trading their existing low-rate mortgage for a significantly higher one.

This “golden handcuff” effect has contributed to historically low housing inventory, as homeowners hold onto properties rather than re-entering the market at today’s rates.

Looking ahead, consumers remain divided on where mortgage rates will land by the end of 2025. While 39% of respondents expect the ResiClub Housing Sentiment Survey found 30-year fixed mortgage rate to settle between 6.00% and 6.50%, another 34% predict rates will end up slightly higher, in the 6.50% to 7.00% range.

A smaller segment of respondents (10%) hold a more optimistic outlook, believing rates could drop to 5.50% to 6.00%, while 13% foresee rates remaining at or above 7.00%.

These findings suggest that while sentiment is shifting, many homeowners remain cautious. Until mortgage rates decline meaningfully or wages rise enough to offset higher borrowing costs, the housing market could remain constrained, with limited supply and subdued transaction activity.

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Image created using artificial intelligence via Midjourney.