Mortgage rates fell to the psychologically important milestone of 6.5% on Thursday, the lowest level in 10 months, according to Mortgage News Daily (MND).
That's likely to set up a surge in mortgage applications among homeowners wanting to refinance or move, and first-time buyers.
As we reported yesterday, 2 million homeowners could already benefit from refinancing to a lower mortgage rate, after allowing for closing costs. And that could rise to 3 million if mortgage rates edge just a little lower.
In an e-newsletter yesterday, Freddie Mac commented on the benefits of a falling rate environment. "Purchase demand continues to rise on the back of lower rates and solid economic growth," said Sam Khater, Freddie Mac’s chief economist. "Though many potential homebuyers still face affordability challenges, consistently lower rates may provide them with the impetus to enter the market."
Some rate averages put the 30-year fixed even lower than 6.5%.
In our round-up of rates this morning, based on data from ICanBuy, the 30-year fixed average drifted to 6.43%, also a long-term low for this index.
While rate averages vary, the trend is lower rates for mortgage consumers compared to just weeks ago.
Why Is 6.5% an Important Milestone?
Though 6.5% isn't low compared to most of the last decade, it's a signficant milestone that could get media coverage, notifying the general public that rates are dropping.
This could spur anyone who purchased a home in the past year to look at their rate and see if they could save money.
According to MND, rates haven't been below 6.5% since October 3, 2024. They reached as high as 7.26% in January 2025.
The National Association of Realtors estimates that around 2.3 million existing homes have been sold so far this year. Most of those homeowners have rates higher than today's levels unless they bought down their rate using cash or seller concessions.
A homeowner with a 7% rate may be able to save the following amounts monthly by dropping their rate by 0.5%.
| Loan Balance | 0.5% Rate Reduction |
|---|---|
| $200,000 | $68 |
| $300,000 | $102 |
| $400,000 | $136 |
| $500,000 | $170 |
Are Rate Averages Available to Everyone?
Not everyone will get a 6.5% Consumers should take averages with a grain of salt, especially if they have imperfect credit. "To paraphrase our methodology, this is a best-case-scenario rate that assumes a 780+ credit score and 25% down payment on an owner-occupied purchase loan within the conforming loan limit," wrote MND's Matthew Graham yesterday. "6.50% would be a competitive average. Some lenders will be higher and lower — especially if buydown points come into play."
So, consumers with less stellar credit scores and smaller down payments will likely pay more than 6.5% for their new mortgage. The good news is that the rate they qualify for today will probably be the lowest they could have gotten over the last 10 months, all other things being equal.
Current Risks to Low Rates
The biggest risk is that mortgage rates rise again, shutting out would-be borrowers who could get approved today. That could happen soon if this morning's inflation report comes in hotter than expected or if next Friday's jobs report shows the labor market reviving. Indeed, it could happen when any future economic report shows higher inflation, an improving economy, or investors shying away from buying American debt.
Once a rate is locked in for a purchase or refinance fixed-rate mortgage, there are few risks. Well, there is one: That rates keep falling, leaving the borrower with a higher rate than they could have gotten later. However, if rates continue to tumble, you can always refinance later, once they've dropped to a level that makes it financially viable after allowing for closing costs.
Of course, nobody knows what will happen to mortgage rates in the future. And only individual borrowers can decide what risks they personally are prepared to tolerate.
