{"id":67339,"date":"2025-08-14T10:03:13","date_gmt":"2025-08-14T10:03:13","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/67339\/"},"modified":"2025-08-14T10:03:13","modified_gmt":"2025-08-14T10:03:13","slug":"even-a-1-mortgage-rate-drop-could-be-enough-to-unlock-the-frozen-housing-market-oxford-economics-says","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/67339\/","title":{"rendered":"Even a 1% mortgage rate drop could be enough to ‘unlock’ the frozen housing market, Oxford Economics says"},"content":{"rendered":"

If you\u2019re waiting for mortgage rates to fall to around 3% to buy a home, don\u2019t hold your breath. The likelihood mortgage rates will drop anywhere near those pandemic-era levels is \u201cunrealistic<\/a>,\u201d a Zillow<\/a> economist recently said.<\/p>\n

But not all hope is lost on the U.S. housing market, at least according to one economist. Bob Schwartz, a senior economist with Oxford Economics<\/a>, told Fortune while there\u2019s \u201cno quantifiable rate\u201d that would trigger more home sales, just a 1% drop in mortgage rates to lower than 6% should be \u201cenough of an incentive\u201d for at least some current homeowners to sell their homes and \u201ctrade up.\u201d<\/p>\n

One of the prime factors keeping the U.S. housing market frozen<\/a> is mortgage rates. During the pandemic, buyers locked in at a sub-3% mortgage rate. But now that mortgage rates are hovering between 6% and 7%, current homeowners have little incentive<\/a> to sell their current homes and either \u201ctrade up,\u201d as Schwartz puts it, or downsize. New buyers are also resistant to higher mortgage rates than they\u2019ve witnessed in recent memory.\u00a0<\/p>\n

In fact, the percentage of mortgages outstanding with a rate higher than 6% has more than doubled since 2021, according to Schwartz, but that figure is still less than 20%. More than 50% of outstanding mortgages have rates in the 3% to 4% range.\u00a0<\/p>\n

While Schwartz told Fortune mortgage rates would have to \u201cdrop significantly\u201d from the current 6.63% to move the masses of homeowners off the sidelines and put their homes up for sale, a smaller drop could encourage enough people to do so.<\/p>\n

\u201cThe housing market would be the biggest beneficiary of lower rates as they would unlock frozen sales by homeowners who are reluctant to give up the low-rate mortgages taken out in the decade following the Great Recession,\u201d Schwartz wrote in an Aug. 8 note.\u00a0<\/p>\n

Other recent reports have also illustrated how little faith there is in mortgage rates dropping to pandemic-era levels and how other housing market factors play into housing affordability concerns in the U.S. A recent Zillow report showed a 0% mortgage rate<\/a> in some U.S. cities wouldn\u2019t be enough to make housing affordable because home prices still remain too high; they\u2019re up more than 50% since the start of the pandemic.<\/p>\n

High home prices \u201care the bigger hurdle,\u201d Michelle Griffith, a luxury real-estate broker with Douglas Elliman, based in New York City, previously told Fortune.<\/p>\n

\u201cInventory is tight and competition is high, so the cost of the property itself is what keeps most buyers on the sidelines,\u201d Griffin said.<\/p>\n

Refinancing and future mortgage predictions<\/p>\n

While a drop in mortgage rates could encourage outright sales, Schwartz told Fortune another likely scenario would be current homeowners refinancing to a lower rate. Although that may not thaw the frozen housing market as much as Americans may hope, it could be good for the economy in other ways.\u00a0<\/p>\n

\u201cA significant increase in refis could have a significant impact on spending, particularly if a good chunk is of the cash-out variety,\u201d Schwartz said. \u201cHomeowners are sitting on $34.5 trillion of housing equity, which could be tapped into for spending purposes.\u201d<\/p>\n

To be sure, mortgage rates would have to \u201cfall pretty drastically\u201d for that to happen, which Oxford Economist doesn\u2019t see in their outlook at this point, he added.\u00a0<\/p>\n

In relation to mortgage rates, all eyes have been on the Federal Reserve\u2019s upcoming Federal Open Market Committee (FOMC) meeting in September that will determine interest rates. On Tuesday, the Consumer Price Index summary reported inflation notched up just 0.2% in July, bringing headline inflation to 2.7%, better than many expected. Still, it\u2019s ahead of the Fed\u2019s 2% target.\u00a0<\/p>\n

While the CPI report had little impact on the 10-year Treasury rate, which is the benchmark for mortgage rates, it shouldn\u2019t prevent the Fed from cutting rates in September, Schwartz said.\u00a0<\/p>\n

\u201cAlthough with inflation still sticky and well above the Fed\u2019s 2 % target \u2026 we still believe the Fed will wait until December to cut,\u201d he added. \u201cHowever, if the upcoming jobs report for August is a dud, similar to the July one, odds are the Fed will cut in September.\u201d<\/p>\n

Introducing the 2025 Fortune Global 500, the definitive ranking of the biggest companies in the world. Explore this year’s list.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"If you\u2019re waiting for mortgage rates to fall to around 3% to buy a home, don\u2019t hold your…\n","protected":false},"author":2,"featured_media":67340,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[64,63,99,7688,10920,171,53536,53537,53538],"class_list":{"0":"post-67339","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-housing","12":"tag-housing-crisis","13":"tag-markets","14":"tag-mortgage-affordability","15":"tag-mortgage-rates","16":"tag-mortgages"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/67339","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=67339"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/67339\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/67340"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=67339"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=67339"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=67339"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}