What Mortgage Rates Falling Below 6% Would Really Mean for Monthly Payments

Fannie Mae's latest monthly economic and housing outlook in September predicted that mortgage rates will average 6.4% at the end of 2025, and could potentially fall to 5.9% by the end of 2026.

A dip below 6% could be just the push potential buyers need to return to the market in the coming year, as many have been waiting for a “magic number” before committing to a mortgage.

According to the economists with the National Association of Realtors®, a "30-year fixed-rate mortgage of 6% would make the median-priced home affordable for about 5.5 million more households—including 1.6 million renters."

If a 30-year fixed mortgage rate hit 6%, about 10% of those additional households would likely buy a home over the next 12 or 18 months, according to an NAR survey. That's about 550,000 households.

"Rates could dip to that projected homebuying sweet spot of 6% by 2026," NAR forecasters say in the report. That would drive home sales up by 14%. 

But how much savings will really come from such a small percentage change? How does tens of thousands of dollars sound?

Mortgage payments on a median home with a 6% rate

Mortgage rates hit their all-time low during the COVID-19 pandemic in late 2020 through early 2021, and since then, prospective homebuyers have been chasing the dream of the lowest rate possible. 

But ever since the rate hit its peak in October 2023—7.79% in the week of October 26—it’s been a slow climb down. 

The rate currently stands at 6.34%, with the national median-priced home coming in at $425,000. 

Let's say a prospective homebuyer is ready right now to buy that $425,000 home with a 20% down payment. This would leave a loan amount of $340,000 on a standard 30-year fixed mortgage. (We’ll exclude taxes and insurance from the equation.)

Buying that valued house right now, at the 6.34% rate, their monthly payment would be roughly $2,122, leading to a total of $763,776 spent over the life of the loan.

Now, at a 6% interest rate, the monthly payment for this loan would be approximately $2,038, totaling about $733,788 over the full 30 years.

Though a mere 0.34% difference, the borrower would spend nearly $30,000 more over three decades with the higher rate of interest. 

Now, at a 5.9% interest rate, the monthly payment for this loan would fall even lower to $2,011, totaling roughly $724,000 over the full 30 years. That means the difference between 5.9% and 6.34% works out to nearly $40,000 more over the life of the mortgage.

So dipping below 6%— even by just a fraction of a percentage point—can add up to tens of thousands of dollars in long-term savings.

Will rates fall again this year?

Time will tell, but in the weeks leading up to the Federal Reserve's first interest rate cut since 2024, rates were on an 11-month trend downward, reaching a low of 6.26% in mid-September.

However, after the announcement was made, the rates ticked up slightly, and now, Freddie Mac's forecast indicates that rates could actually rise through the end of the year, climbing back to around 6.4% by December. That matches the Realtor.com® economic research team's midyear forecast update, which called for year-end rates around 6.4%.

It remains to be seen whether the government shutdown and the upcoming labor and inflation data will have an impact through the end of the year. 

"Inflation data and inflation expectations remain key, as any sign of stickiness could keep the Fed cautious on cutting rates," says Realtor.com senior economic research analyst Hannah Jones. "The Fed’s communications and pace of policy changes will also set the tone, with markets responding quickly to any signal of shifting policy path."

However, should the rate fall to 6%, NAR’s report identified key metros that would benefit from a mortgage rate drop, with Atlanta, Dallas, Minneapolis, Cleveland, and Kansas City, MO-KS, seeing the largest uptick in home sales if rates were to drop to 6%.