A 25-basis-point Fed cut could make homeownership more affordable for millions
A possible Fed rate cut in September could help US homebuyers save an average of $20,569 over a 30-year mortgage if rates drop from 6.29% to 6.00%, based on a study of 935 metro areas by HomeAbroad and Ziffy.ai.
Michele Lawrie, an experienced real estate professional, said that 6% is a key psychological level for mortgage rates, often highlighted by agents and industry leaders. The National Association of Realtors estimated that dropping rates to 6% could help 5.5 million more US households afford a home. According to HomeAbroad, buyers would save about $57 a month, or $685 a year, if rates fell to that level.
Savings vary widely by region
The study revealed that buyers in Nantucket, MA, and Vineyard Haven, MA, would see the largest lifetime savings—over $200,000 in some cases. Even the most affordable markets, such as Canton, IL, would see savings of around $4,800.
On average, buyers in the West would save $90.69 per month, totaling $32,650 over 30 years, while those in the Midwest would save $43.68 per month, or $15,720 over 30 years. The Northeast and South fall in between, with average lifetime savings of $24,445 and $17,529, respectively.
A recent Northwestern Mutual study found that 35% of Gen Xers lose sleep at least once a month over financial uncertainty, and 56% worry they’ll outlive their savings, a higher rate than Boomers (14%).
“Many Gen X’ers are juggling responsibilities on both ends, supporting aging parents while still helping their children,” Sippel said. “They’re feeling the pressure of being part of the sandwich generation."
A 2022 AAG study revealed that more than half of Gen X adult children do not have enough money to help their senior parents. The study also found that 55% of adult children said they are not financially prepared to care for their parents in a time of need.
Meanwhile, even though 90% of Gen Z want to own a home someday, 62% fear they never will. Financial insecurity has led nearly one in three (30%) to consider squatting or living in their car, according to a Clever Offers report.
Lower rates ease income requirements
The analysis showed that dropping mortgage rates to 6% would lower the annual income needed to qualify by about $2,448 for most buyers, with even bigger savings in pricier areas. This could help more middle-income earners, like teachers and first responders, afford homes in markets that were previously out of reach.
This comes as new US Census Bureau data showed that only 11% of Americans moved in 2024, the lowest rate in years, as high housing costs and economic pressures made it harder for people to relocate.
Monthly mortgage costs for homeowners climbed to $2,035, up from $1,960. The highest payments were seen in California ($3,001), Hawaii ($2,937), New Jersey ($2,797), Massachusetts ($2,755), and the District of Columbia ($3,181).
Renters also faced higher costs, with median rent plus utilities rising from $1,448 to $1,487. The median share of income spent on rent held steady at 31%, but the squeeze on affordability remained.
Despite the cost pressures, more Americans expected mortgage rates to fall than to rise, according to Fannie Mae’s Home Purchase Sentiment Index (HPSI).
