U.S. mortgage rates fell to 6.1% for the 30-year fixed loan, marking the lowest level in over three years and signaling a shift from last year’s highs. Rising home-buying demand follows a sustained decline in borrowing costs.
- 30-year fixed mortgage rate fell to 6.1% in January 2026, the lowest since early 2020
- Rate declined from 7.04% in January 2025, a 94-basis-point drop
- Home-purchase applications rose 18% month-over-month in January 2026
- Refinancing volume increased by 23% amid lower borrowing costs
- Monthly payment for a $400,000 mortgage dropped from ~$2,500 to ~$2,400
- First-time buyers and millennials show renewed participation
The average rate on the 30-year fixed mortgage dropped to 6.1% in January 2026, according to national lending data, representing a significant decline from the 7.04% recorded during the same month in 2025. This marks the first time rates have fallen below 6.2% since early 2020, reflecting broader trends in Federal Reserve policy adjustments and declining inflation pressures. The drop has coincided with a measurable uptick in home-purchase applications, which rose 18% month-over-month in January, driven by increased consumer confidence and improved affordability. Refinancing activity also surged, with volume increasing by 23% as borrowers sought to lock in lower rates ahead of potential volatility. Homebuyers now face substantially reduced monthly payments compared to a year ago. For a $400,000 mortgage, the monthly principal and interest payment decreased from approximately $2,500 to $2,400—the difference translating to nearly $1,200 in annual savings. This improvement in affordability is particularly notable in markets with historically high price-to-income ratios. The decline in mortgage rates has positively impacted housing market sentiment across multiple regions, with new home sales rising in urban and suburban areas alike. Lenders report higher application volumes, while real estate agents note increased buyer engagement, especially among millennials and first-time homebuyers who were previously priced out.