Mortgage rates have dropped under 6% for the first time since 2022.

For sale sign in yard of house

Getty Images

Key Takeaways The average 30-year fixed mortgage rate has slipped to about 5.98%, its lowest level since September 2022. Home buyers have more purchasing power when mortgage rates drop. Meanwhile, home sellers are hopeful that lower mortgage rates will attract buyers.

U.S. 30-year mortgage rates have dipped under 6% for the first time since September 2022, creating the best affordability window to purchase a home in more than three years.

The average 30-year fixed mortgage rate is around 5.98% to 5.99% this week, Freddie Mac said Thursday. The percentage is down sharply from 6.8% to 6.9% a year ago and from peaks near 8% in late 2023, per The Wall Street Journal. On a typical loan, that rate drop can cut monthly payments by hundreds of dollars for home buyers.

What this means for home buyers

With lower mortgage rates, monthly payments are smaller, which frees up cash. For example, for a mortgage rate of around 6% compared to 6.85%, the difference in payment on a $600,000 loan is about $310 per month.

Lawrence Yun, chief economist at the National Association of Realtors, estimated that with rates under 6%, roughly 5.5 million more households qualify for a mortgage than a year ago. He expects a share of them to actually enter the market this year.

“Most newly qualifying households do not act immediately, but based on past experience, about 10% could enter the market — potentially adding roughly 550,000 new homebuyers this year compared with last year,” Yun said in a press release.

With financing cheaper and more households qualifying, buyer traffic is expected to strengthen into the key spring selling season. Kimberly Schmidt, a real estate agent at Compass Real Estate in San Diego, California, told CBS News this month that she is already seeing more buyer activity this year than last, especially from first-time buyers.

However, buyers are concerned about affordability. Redfin found that home prices in the U.S. were up 1.1% in January compared to the same period last year, selling for a median price of $422,980. According to Realtor, homes are staying on the market longer compared to a year ago.

What this means for home sellers

Many owners sitting on 3% to 4% mortgage rates still hesitate to trade up, but the gap between their existing rate and today’s has narrowed enough that life events like family changes and relocations are starting to push more listings onto the market, according to Realtor.

Home sellers are hopeful that lower mortgage rates will attract buyers, per WSJ. Daniel and Kyla Seely, a couple who listed their three-bedroom home in Newark, Ohio, in November for $324,900, are in this category. The Seelys have had no offers so far and are hopeful that declining mortgage rates will turn things around.

“There’s a pool, I think, of wannabe buyers who have just been sitting on the sidelines and waiting for rates to come down,” Daniel Seely told WSJ. “If they see a drop from above 6, to having that first number be 5, I think that would bring a lot of people out.”

Sign up for the Entrepreneur Daily newsletter to get the news and resources you need to know today to help you run your business better. Get it in your inbox.