How Falling Mortgage Rates Affect Your Buying Power

A half-percent drop in mortgage rates doesn’t sound dramatic. But in real terms, it can increase buying power by 5% or more.

Here’s why: on a $600,000 loan, a 0.50% lower rate saves about $200–$250 per month. That savings stretches debt-to-income ratios and gives buyers room to qualify for a higher price point without changing their monthly budget.

This fall, mortgage rates have eased into the low-6s after spending much of the year closer to 7%. For many buyers, that difference is the margin between affordability and frustration. Sellers are noticing, too — homes that sat stagnant during the summer are moving again as buyers’ comfort zones expand.

The key for buyers is to treat improved buying power wisely. Stretching to the max just because the numbers work isn’t always smart. Instead, think of the rate drop as a chance to:

• Buy the same type of home more comfortably

• Explore neighborhoods that were slightly out of reach

• Maintain cash reserves instead of over-leveraging

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Falling rates don’t solve every challenge in housing. Inventory is still tight in many markets, and competition can flare up quickly. But when affordability inches higher, buyers who are ready to act have the advantage.

Rates don’t need to collapse to make a difference.

Sometimes, half a point is all it takes to change the math.