How Mortgage Rates Affect Buying Power in Silicon Valley (2025)

The Current Mortgage Rate Landscape

As of August 13, 2025, average mortgage rates in Silicon Valley are:

• 30-Year Fixed: ~6.7%

• 15-Year Fixed: ~6%

While these rates are lower than the near 8% peak seen in late 2023, they remain significantly higher than the historically low 3–4% levels of recent years. This shift has a direct and measurable effect on homebuyers’ purchasing power.

1. Higher Monthly Payments

When mortgage rates rise, monthly payments on a given loan amount increase.

• Example: A $1M loan at 3% interest costs about $4,200/month (principal + interest).

• At 6.7%, the same $1M loan jumps to roughly $6,450/month.

This means that for the same home price, buyers now pay far more each month.

2. Smaller Loan Qualification

Because lenders approve loans based largely on your monthly payment affordability, higher mortgage rates shrink the loan amount you can qualify for.

• At 3–4% interest, a buyer might have qualified for ~$1,000,000.

• At 6.7%, with the same income and debt profile, that may drop to around $800,000.

In Silicon Valley, where median prices in Santa Clara County are around $1.93M, this can force buyers to either save more or lower expectations.

3. Larger Down Payment Requirements

To keep monthly payments manageable, buyers often need:

• A bigger down payment — for example, putting down $400K instead of $300K.

• A lower purchase price — which may mean choosing a smaller home or different location.

4. Market Demand & Competition

Higher rates can thin out the pool of qualified buyers. While demand might ease slightly, Silicon Valley’s limited housing inventory still fuels competition for desirable homes, keeping prices resilient.

5. Refinancing & Equity Strategies

Some homeowners who purchased at higher rates in recent years can now refinance to reduce monthly payments — but for many, current rates are still high compared to their existing mortgages. Others tap into built-up home equity for renovations or investment, influencing broader market activity.

Key Takeaway

Mortgage rates around 6.7% in 2025 mean less buying power than in recent years. Buyers must:

• Reassess budgets

• Save larger down payments

• Possibly target lower-priced homes

• Work closely with an experienced Silicon Valley real estate agent for the best strategy

✅ Pro Tip from Gurjeet Rai:
"In today’s market, the right strategy isn’t just about finding the right home — it’s about structuring offers and financing to maximize your buying power despite higher rates."

📞 Contact Gurjeet Rai at 408-802-5303 for a personal consultation.