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The Mortgage Rate ‘Magic Number’ Homebuyers Are Waiting For
0 Share Newsweek is a Trust Project member See more of our trusted coverage when you search. Prefer Newsweek on Google to see more of our trusted coverage when you search. Mortgage rates were supposed to go down just below the 6 percent mark through the course of 2026, giving some respite to struggling homebuyers, experts once believed. That did not happen, and the national 30-year fixed-rate mortgage is now averaging 6.66 percent after weeks of climbing following the start of the war in Iran.
These increases have more or less killed the rebound of the U.S. housing market experts were expecting would be triggered by improvements in affordability this year. Americans are holding off buying a home for now as they face still-climbing prices and stubbornly high borrowing costs.
But they are still holding hope that mortgage rates will come down to a level the country has not seen since 2022, according to a new survey .
For example, on a $400,000 30-year mortgage with no down payment, a 6.66 percent rate would mean a principal-and-interest payment of about $2,568 a month. At 5 percent, that payment would fall to about $2,147 a month—a savings of roughly $421 per month, or about $5,050 a year. Over 30 years, the lower rate would reduce total interest by roughly $151,000, assuming the loan were held for the full term.
According to a Neighbors Bank survey of 1,000 U.S. adults aged 18 and older, more than half of potential buyers across the country are waiting for a rate the nation has seen last in August 2022 before making a purchase: around 5 percent.
The poll, which used SurveyMonkey, was conducted by the mortgage lender in July.
Among all respondents, 72 percent said they have delayed their home search, waiting an average of 13 months for mortgage rates to improve. Millennials have waited the longest at 14 months, compared to eight months for Gen Z. The other 28 percent of homebuyers were actively searching for a home and were ready to buy one.
Thirty-four percent of respondents would buy a home immediately if rates dropped to their target; another 34 percent are unsure of what they would do; and 32 percent would keep on waiting.
Nick Panize of Westgate Capital Ventures told Realtor.com that waiting for a "magic number" could backfire on buyers, who risk facing "more competition and potentially higher home prices" when rates finally come down.
"So maybe you save on the rate, but pay another $50,000 or $100,000 for the same house," he said. "And if you buy at a higher rate today and rates eventually drop, you can always refinance. You can’t go back and refinance what you paid for the house."
Mortgage rates, even as they remain nearly double their pandemic lows, are only one of several factors keeping potential buyers on the sidelines of the U.S. housing market, including economic uncertainty (12 percent) and hope that home prices will drop (10 percent).
Twenty-five percent of respondents just could not afford to buy a home right now, and 18 percent reported that they were still saving for a down payment.
As of the week ending February 25, the national 30-year fixed-rate mortgage had fallen just below 6 percent, at 5.98 percent, according to Freddie Mac. That was largely in line with experts’ expectations.
But disruptions and uncertainty caused by the ongoing war in Iran, which has no clear end in sight months later, sent mortgage rates climbing back up. Experts now expect mortgage rates to end the year in the mid-6 percent range, as declines would only be possible if inflation cools and the Federal Reserve cuts rates.
As of now, the situation is uncertain. A recent weaker-than-expected job market report published earlier this month has increased the likelihood that the Fed will not increase its interest rates any time soon.
But inflation remains well above the central bank’s goal of 2 percent, at 3.4 percent in July.
A majority of forecasters now expect the Fed to keep rates on hold for much of the year, while some warn that further tightening remains possible.
Contact Newsweek editors on this story: Matthew Robinson and James Debens
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