Key takeaways
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- 30-year fixed mortgage rates dropped to 6.06% (lowest since Sept 2022), improving the sales pitch ahead of spring 2026 — but demand may still lag.
- The housing market remains constrained by the lock-in effect: ~70% of borrowers have mortgages below 5%, limiting willingness to sell and move.
- Trump’s proposed $200B mortgage-bond buying campaign is a headline catalyst, but economists warn it may be too small to materially reset rates versus the broader MBS market.
- Lower rates could lift prices in tight regions (Northeast/Midwest) while benefiting buyers more in high-inventory markets (parts of the Sun Belt); tech equity gains are also supporting demand in Northern California.
What Happened?
US 30-year fixed mortgage rates fell to 6.06%, down from 6.16% the prior week, marking the lowest level since September 2022. The decline followed President Trump’s announcement of a $200 billion mortgage-bond purchase program aimed at improving housing affordability. Despite slightly better buyer conditions (more listings, slower price growth, and rates down from ~7% in early 2025), contract signings fell to the lowest seasonally adjusted level on record in December (excluding the April 2020 lockdown period), underscoring how frozen activity remains.
Why It Matters?
A dip to ~6% helps sentiment, but it doesn’t solve the market’s core supply constraint: homeowners with much cheaper mortgages are reluctant to move. Roughly 7 in 10 borrowers are locked in below 5%, and more than half are below 4%, implying rates may need to fall much further to meaningfully boost turnover and listings. For investors, the bigger risk is that policy conflict around the Fed could push yields higher, offsetting mortgage support; if markets question Fed independence, Treasury yields (and mortgage rates) can rise. The outcome matters across housing-linked equities (brokerages, homebuilders, mortgage/real-estate platforms) because transaction volume is still the key variable, not just headline rate prints.
What’s Next?
The spring 2026 season will test whether breaking the psychological 6% threshold can pull buyers off the sidelines amid job and inflation uncertainty. Watch Treasury yields and Fed credibility headlines, since mortgage rates may not keep falling if risk premia rise. Also watch regional divergence: lower rates could reignite bidding and push prices up in tight-supply markets (Northeast/Midwest), while offering more real relief in inventory-heavy areas (notably parts of the Sun Belt). Capital Economics expects rates to end the year around 6.5%, which would limit the upside case for a rapid normalization in housing activity.
