U.S. Homebuyers Finding Affordable Monthly Payments Amid Rising Mortgage Rates
By Prashant Gopal, Bloomberg News
Despite the average mortgage rate nearing 6%, U.S. homebuyers are currently enjoying the most affordable monthly payments in a year. San Antonio real estate agent Tavyn Weyman has discovered a strategy to make these payments even lower – by buying new homes.
Builders in various markets across the country are offering heavily subsidized mortgage rates on unsold inventory, sometimes matching the record lows seen during the Covid-19 pandemic. In addition to discounted rates, buyers are also being enticed with perks like free appliances, finished basements, and zero closing costs.
Weyman shared an example of a large private builder offering a client a 3.49% fixed rate on a $414,000 home, along with additional incentives to cover expenses and make the first month effectively free. These attractive offers are aimed at capturing the attention of buyers amidst job insecurities stemming from factors like tariffs, a government shutdown, and artificial intelligence.
Despite a decline in mortgage rates, the housing market has not seen the expected surge in demand. Job cuts exceeding 1 million so far this year have contributed to the uncertainty, with some builders reporting weakened demand from entry-level buyers.
While lower interest rates typically boost housing demand, other economic factors such as job security concerns can offset this impact. Renting has become a more appealing option for many, as rental rates decrease and the supply of resale listings increases.
Builders are resorting to offering incentives and discounts to attract buyers, with new home prices becoming more competitive compared to existing homes. However, sales remain sluggish, prompting questions about the overall softness in the market.
Buyers need to be cautious when considering deals that offer temporary rate reductions, as they may lead to higher monthly payments once the promotional period ends. Builders like Lennar Corp. are implementing inventory close-out sales with reduced rates and price reductions to entice buyers away from the resale market.
Despite the challenges, Weyman noted that the strategy of promoting new homes over resale options has been successful in his experience, with the majority of homes he sold this year being newly built.
As the housing market continues to navigate through economic uncertainties, buyers have the opportunity to take advantage of attractive offers on new homes, ultimately leading to more affordable homeownership options.
—With assistance from Julia Fanzeres.
(Updates with October job cuts in eighth paragraph.)
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