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Mortgage Rates Hold Steady After Early March Drop

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Mortgage rates dropped significantly at the start of March before stabilizing, with the average 30-year fixed-rate mortgage settling at 6.65%, according to Freddie Mac. This marks a 19-basis-point (bps) decline from February. Meanwhile, the 15-year fixed-rate mortgage fell by 20 bps to 5.83%.

The drop in long-term borrowing costs was driven by a 24-bps decline in the 10-year Treasury yield, which averaged 4.28% in March. This decline provided a boost to the housing market—new home sales increased 5.1% year-over-year in February, while the participation of first-time homebuyer of existing homes rose 26% over the same period. However, existing home sales saw a slight dip from last February.

The decrease in Treasury yields reflects growing concerns about an economic slowdown, particularly as shifts in tariff policy weaken consumer confidence. Despite this, the labor market remained resilient in February, posting steady job gains even as the unemployment rate ticked up slightly. The strength of upcoming jobs reports will be critical in assessing whether recession risks are intensifying.

At the latest FOMC meeting, the Federal Reserve held interest rates steady but revised its 2025 economic projections: expected GDP growth was lowered to 1.7% (down from 2.1% in December 2024) and the projected unemployment rate was raised to 4.4%, up 0.1 percentage point from previous estimates.

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Lower Mortgage Rates, Better Affordability

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As housing affordability remains a critical challenge across the country, mortgage rates continue to play a central role in shaping homebuying power. Mortgage rates stayed elevated throughout 2023 and early 2024. Recent data, however, shows a modest decline in mortgage rates. Even slight declines can have a significant impact on housing affordability, pricing more households back into the market. New NAHB Priced-Out Estimates show how home price increases affect housing affordability in 2025. This post presents details regarding how interest rates affect the number of households that can afford a median priced new home.

At the beginning of 2025, with the average 30-year fixed mortgage rate at 7%, around 31.5 million households could afford a median-priced home at $459,826. This requires a household income of $147,433 by the front-end underwriting standards[1]. In contrast, if the average mortgage rates had remained at the recent peak of 7.62% in October 2023, only 28.7 million households would have qualified. This 62-basis point decline has effectively priced 2.8 million additional households into the market, expanding homeownership opportunities.

The table below shows how affordability changes with each 25 basis-point increase in interest rates, from 3.75% to 8.25% for a median-priced home at $459,826. The minimum required income with a 3.75% mortgage rate is $110,270. In contrast, a mortgage rate of 8.25%, increases the required income to $163,068, pushing millions of households out of the market.

As rates climb higher, the priced-out effect diminishes. When interest rates increase from 6.5% to 6.75%, around 1.13 million households are priced out of the market, unable to meet the higher income threshold required to afford the increased monthly payments. However, an increase from 7.75% to 8% would squeeze about 850,000 households out of the market.

This exemplifies that when interest rates are relatively low, a 25 basis-point increase has a much larger impact. It is because it affects a broader portion of households in the middle of the income distribution. For example, if the mortgage interest rate decreases from 5.25% to 5%, around 1.5 million more households will qualify the mortgage for the new homes at the median price of $459,826. This indicates lower interest rates can unlock homeownership opportunities for a substantial number of households.

[1] . The sum of monthly payment, including the principal amount, loan interest, property tax, homeowners’ property and private mortgage insurance premiums (PITI), is no more than 28 percent of monthly gross household income.

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Refinancing Drives Mortgage Activity Higher in February

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The Market Composite Index, a measure of mortgage loan application volume from the Mortgage Bankers Association’s (MBA) weekly survey, rose 4.7% month-over-month on a seasonally adjusted (SA) basis, primarily driven by refinancing activity. Compared to February last year, the index is 15.6% higher.

The Purchase Index declined 6.5% (SA) from the previous month, though it may rebound as mortgage rates continue to fall amid weakening consumer sentiment and growing economic concerns. Meanwhile, the Refinance Index surged 22.7% (SA). Compared to February last year, purchase applications are marginally higher by 2.1%, while refinance activity has jumped 43.7%.

The average 30-year fixed rate mortgage reported in the MBA survey for February fell 15 basis points (bps) to 6.9% (index level 687), 7 bps lower than a year ago.

Loan sizes also increased with the average total market loan size (purchases and refinances combined) rising by 4.4% on a non-seasonally adjusted (NSA) basis from January to $389,500. For purchase loans, the average size increased by 3.93% to $446,000, while refinance loans experienced a 6.1% increase, reaching an average of $305,800. Adjustable-rate mortgages (ARMs) saw a jump in average loan size of 5.9% from $1.07 million to $1.13 million.

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Mortgage Rates Ease Slightly in February Amid Economic Uncertainty

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Mortgage rates declined marginally in February, with the average 30-year fixed-rate mortgage falling to 6.84%. After climbing steadily since December and peaking at 7.04% in mid-January, rates have been trending downward.

According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage decreased 12 basis points (bps) from January, while the 15-year fixed-rate mortgage fell 13 bps to 6.03%. Although the recent decline in mortgage rates and an increase in the total single-family homes supply are positive signs for buyers, homebuying activity may remain sluggish due to persistent high prices and mortgage rates still exceeding 6%.

The 10-year Treasury yield declined 11 bps to an average of 4.52% in February, reversing its recent upward trend. This shift reflects concerns over a weakening U.S. economy due to inflationary pressures and increasing geopolitical risks. In response, the markets anticipate that the Federal Reserve will resume rate cuts later in the year.

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Families Must Spend 38% of Their Income on Mortgage Payments

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In a clear sign illustrating the housing affordability challenges facing Americans, the National Association of Home Builders (NAHB)/Wells Fargo Cost of Housing Index (CHI) found that in the fourth quarter of 2024, a family earning the nation’s median income of $97,800 needed 38% of its income to cover the mortgage payment on a median-priced new home. Low-income families, defined as those earning only 50% of the median income, would have to spend 76% of their earnings to pay for the same new home.

The figures track closely for the purchase of existing homes in the U.S. as well. A typical family would have to pay 37% of their income for a median-priced existing home, while a low-income family would need to pay 74% of their earnings to make the same mortgage payment.

There was no change in the percentage of a family’s income needed to purchase a new home (38%) between the third and fourth quarters of 2024. However, the cost burden did increase slightly for low-income families, rising from 75% to 76% of their income.

Meanwhile, the cost burden of existing homes edged lower for both median- and low-income families between the third and fourth quarter. The CHI indices were 37% and 74%, respectively, in the fourth quarter, down from 38% and 75% in the third quarter. The slight uptick in affordability was due to median existing home prices falling 2% from the third quarter to the fourth quarter of 2024.

CHI is also available for 176 metropolitan areas, calculating the percentage of a family’s income needed to make the mortgage payment on an existing home based on the local median home price and median income in those markets.

In 10 out of 176 markets in the fourth quarter, the typical family is severely cost-burdened (must pay more than 50% of their income on a median-priced existing home). In 85 other markets, such families are cost-burdened (need to pay between 31% and 50%). There are 81 markets where the CHI is 30% of earnings or lower.

The Top 5 Severely Cost-Burdened Markets

San Jose-Sunnyvale-Santa Clara, Calif., was the most severely cost-burdened market on the CHI, where 87% of a typical family’s income is needed to make a mortgage payment on an existing home. This was followed by:

Urban Honolulu, Hawaii (74%)

San Diego-Chula Vista-Carlsbad, Calif. (69%)

San Francisco-Oakland-Berkeley, Calif. (69%)

Naples-Marco Island, Fla. (65%)

Low-income families would have to pay between 129% and 174% of their income in all five of the above markets to cover a mortgage.

The Top 5 Least Cost-Burdened Markets

By contrast, Decatur, Ill., was the least cost-burdened market in the CHI, where typical families needed to spend just 16% of their income to pay for a mortgage on an existing home. Rounding out the least burdened markets are:

Cumberland, Md.-W.Va (17%)

Springfield, Ill. (17%)

Elmira, N.Y. (19%)

Peoria, Ill. (19%)

Low-income families in these markets would have to pay between 31% and 39% of their income to cover the mortgage payment for a median-priced existing home.

Visit nahb.org/chi for tables and details.

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Mortgage Applications Increase Marginally in January

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The Market Composite Index, a measure of mortgage loan application volume from the Mortgage Bankers Association’s (MBA) weekly survey, increased by 3.1% month-over-month on a seasonally adjusted (SA) basis, primarily driven by purchasing activity. Compared to January last year, the index is higher by 3.4%. The Market Composite Index which includes the Purchase and Refinance Indices: purchasing experienced a monthly gain of 3.8%, while refinancing decreased 2.3% (SA). On a year-over-year basis, however, the Purchase Index is lower by 3.4%, while the Refinance Index remains higher at 18.6%.

The average 30-year fixed rate mortgage reported in the MBA survey for January ticked up 20 basis points (bps) to 7.02% (index level 702). This rate is 24 basis points higher than the same period last year.

Average loan size (purchases and refinances combined) increased slightly by 0.8% on a non-seasonally adjusted (NSA) basis from December to $373,200. For purchase loans, the average size increased by 1.8% to $429,400, while refinance loans experienced a 5.4% decrease, reaching an average of $288,200. Adjustable-rate mortgages (ARMs) saw a continued decline in average loan size for three consecutive months, down 0.6% from $1.074 million to $1.068 million.

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Mortgage Rates Tick Upward in January

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Mortgage rates edged higher in January, with the average 30-year fixed-rate mortgage reaching 6.96%. Rates had been climbing steadily since mid-December—even surpassing 7%—before easing in recent weeks as the bond market stabilized following news that President Donald Trump postponed tariffs plans to February 1.

According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage rose 24 basis points (bps) from December, extending a two-year trend of fluctuations between 6% and 7%. Meanwhile, the 15-year fixed-rate mortgage increased 23 bps to land at 6.13%.

The 10-year Treasury yield, a key benchmark for mortgage rates, averaged 4.63% in November—33 basis points higher than December’s average. A strong economy, coupled with ongoing uncertainty over inflation due to tax cuts and tariffs, continues to put upward pressure on yields. This uncertainty is also reflected in the increased range for the projected 2025 core PCE inflation in the December FOMC economic projections, now estimated between 2.1% and 3.2%, compared to a narrower 2.1% to 2.5% range in September.

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Mortgage Applications Increase Marginally in December

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The Market Composite Index, a measure of mortgage loan application volume from the Mortgage Bankers Association’s (MBA) weekly survey, increase marginally by 2.9% month-over-month on a seasonally adjusted (SA) basis. Compared to December 2023, the index is higher by 10.2%. The Market Composite Index includes the Purchase and Refinance Indices, which saw monthly gains of 4.1% and 6.7% (SA), respectively. On a year-over-year basis, the Purchase Index showed a modest increase of 1.1%, while the Refinance Index is 31.7% higher.

The average 30-year fixed rate mortgage reported in the MBA survey for December remained relatively stable at 6.82% (index level 682), reflecting a minor decline of 0.4 basis points. This rate is 9 basis points lower than the same period last year.

Average loan sizes, excluding refinance loans, saw slight declines in December. On a non-seasonally adjusted (NSA) basis, the average loan size (purchases and refinances combined) fell by 2.1% from November to $370,300. For purchase loans, the average size decreased by 3.3% to $421,800, while refinance loans experienced a 4.8% increase, reaching an average of $304,500. Adjustable-rate mortgages (ARMs) also saw a marginal decline in loan size, down 0.8% from $1.08 million to $1.07 million.

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Mortgage Activity Declines in November as Rates Continue to Increase

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The Market Composite Index, a measure of mortgage loan application volume by the Mortgage Bankers Association’s (MBA) weekly survey, decreased 14.5%, month-over-month, in November on a seasonally adjusted (SA) basis. The slowdown in mortgage activity can be attributed to higher mortgage rates as the ten-year Treasury yield increased in November, reflecting uncertainties surrounding the elections.

The market decline was reflected primarily in the Refinance Index (SA), which decreased by 33.2% month-over-month. Meanwhile, the Purchase Index (SA) showed a modest increase of 2.7% over the same period. However, compared to October 2023, the Market Composite Index is up by 16.4%, with the Purchase Index seeing a slight 4.8% increase and the Refinance Index higher by 45.9%.

The average contract rate for 30-year fixed mortgage rate per the MBA survey for November averaged at 6.8%, 29 basis points (bps) higher month-over-month in response to a higher ten-year Treasury rate.

Loan size metrics also reflected market adjustments. The average loan size for the total market (including purchases and refinances) shrank 2.9% month-over-month on a non-seasonally adjusted (NSA) basis, decreasing from $389,800 to $378,400. Loan sizes for purchasing and refinancing decreased. Purchase loans averaged $436,200, down 2.7% from $448,300, while refinance loans saw a sharper 9.9% decrease, with the average loan size falling from $322,500 to $290,600. Adjustable-rate mortgages (ARMs) also declined 6.0%, from $1.15 million to $1.08 million.

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Mortgage Rates Rise in November Amid Post-Election Market Volatility

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Mortgage rates climbed in November, driven by market volatility and a surge in Treasury yields following the recent elections. On the day after the election results, the 10-year Treasury yield spiked by 14 basis points (bps), setting the stage for further rate increases throughout the month.

According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage increased 38 basis points from October, reaching 6.81%. Meanwhile, the 15-year fixed-rate mortgage saw an even steeper increase of 43 bps to land at 6.03%.

The 10-year Treasury yield, a key benchmark for mortgage rates, averaged 4.37% in November—38 bps higher than October’s average. This increase reflected heightened market uncertainty and persistent volatility. Looking ahead, the Federal Reserve is set to meet on December 17-18 to evaluate the possibility of another rate cut. Since the federal funds rate influences interest rates, a rate cut could potentially ease long-term mortgage rates, but this decision will hinge on the latest employment and inflation data, and other macroeconomic factors that could have an upward pressure on inflation including larger government deficits and higher tariffs. NAHB forecasts additional declines to the federal funds rate into a range below 4%.

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