Mortgage Rate News and Forecast for the Week of January 6-12, 2025

New year, new housing market? Not quite.

In Early 2025With prices and list prices proving sticky, affordability remains a key issue for potential homebuyers, he said Joel BernerChief Economist at Realtor.com.

average rate for a 30 year fixed mortgage Close to 7% by 2025, up from last January.

“Several key factors can cause mortgage rates to rise or fall,” he said Valerie SaundersChief executive strategist for the National Association of Mortgage Brokers. The mortgage market is deeply affected by inflation, Federal Reserve policiesbond prices, GDP growth and employment numbers, to name a few.

According to the current economic conditions, a a significant reduction in mortgage interest rates According to Saunders, pre-spring home buying season is unlikely.

Plus, given the recent strong economic data and speculation from President-elect Donald Trump tax, immigration and tariff proposals will reignite inflation, the Fed predicts a much slower pace of interest rate cuts by the agency in 2025.

With so much uncertainty, that’s the only thing that’s certain mortgage rate forecasts it’s always changing. “Buyers shouldn’t worry about timing the mortgage interest market and should instead focus on finding a home that fits their budget and making as large a down payment as possible,” Berner said.

Read more: 2025 Mortgage Interest Forecast

Where will mortgage rates go in 2025?

Apart from typical daily fluctuations, mortgage interest expected to remain above 6.5% for the next few months. If inflation continues to cool and the Fed is able to pull off its projected two 0.25% rate cuts, mortgage rates could approach 6.25% by the end of the year.

Today’s prices seem high compared to recent times 2% rates of the pandemic period. But experts say a drop below 3% on a 30-year fixed mortgage is unlikely without a severe economic downturn. Since the 1970s a 30 year fixed mortgage It was around 7%.

Only a sudden economic shock, such as the onset of a recession or a spike in oil prices, can cause mortgage rates to drop. Keith GumbingerVice President of mortgage website HSH.com. “Abrupt changes in direction are usually the result of some significant event occurring somewhere that drives financial markets higher.”

What will affect mortgage rates in the near future?

The biggest wild card for mortgage rates is the new administration’s economic policies. Trump’s proposals for tax reductions and tariffs could stimulate demand, increase the deficit and cause inflation to rise again. Mortgage rates are very sensitive to inflation.

“Tax cuts, tariffs and mass deportations are all inflationary measures that will indirectly raise mortgage rates while directly increasing the cost of home building and purchasing,” Berner said. If these policies are implemented sooner than markets expect, it could result in an equally rapid rise in mortgage rates, Berner said.

High inflation will also prompt the Fed to delay future rate cuts. Although the Fed influences the direction of overall debt interest rates, it does not directly control the mortgage market.

However, investors are interested in the Fed’s future outlook for rate adjustments, as it determines their trading strategy and risk assessment. Therefore, market forces often act in anticipation of the Fed’s policy actions.

Medium 30-year fixed mortgage rates keep a close eye on bond yields, especially 10-year Treasury yields. If unemployment is expected to rise, bond yields and mortgage rates will fall. But if the result doesn’t match market expectations, returns can quickly rise or fall.

Mortgage rates are also affected by geopolitical events, including military conflicts and elections. Political instability can lead to economic uncertainty, which can lead to greater volatility in bond yields and mortgage rates.

Bond market investors must be convinced that the economy is cooling for mortgage rates to change course. Therefore, the absence of a fresh decline in the inflation trend or a sudden weakening of labor conditionsGumbinger said mortgage rates will stay close to 7% for a while.

What will affect the housing market in 2025?

Today’s unaffordable housing market a result of high mortgage rates, a long-term housing shortageloss of purchasing power due to expensive house prices and inflation.

🏠 Low housing stock: A balanced housing market typically has five to six months of supply. Today, most markets are close to half that amount. according to Freddie Macwe still have a shortfall of about 3.7 million homes.

🏠 High mortgage degrees: In early 2022, mortgage rates hit an all-time low of around 3%. As inflation rose and the Fed raised interest rates to tame it, mortgage rates more than doubled. In 2025, mortgage rates are still high, driving millions of potential buyers out of the housing market.

🏠 Rate-lock effect: Because most of the homeowners tied to mortgage interest When it’s below 5%, they don’t want to give up low mortgage rates and have little incentive to list their homes for sale, leaving resale inventory scarce.

🏠 High house prices: Although demand for homes has been limited in recent years, home prices remain high due to a lack of inventory. The median US home price was $429,963 It rose 5.4% year-over-year in November, according to Redfin.

🏠 Rapid inflation: Inflation means an increase in the cost of basic goods and services and a decrease in purchasing power. It also affects mortgage rates: When inflation is high, lenders typically raise interest rates on consumer loans to ensure profits.

Is it better to wait or buy?

Rushing is never a good idea buy a house Without knowing what you can afford, set a clear budget for buying a home. Here’s what experts recommend before buying a home:

💰 Build your credit account. Your credit score will help you determine if you qualify for a mortgage and at what interest rate. A credit account A score of 740 or higher will help you qualify for a lower rate.

💰 Save for a bigger down payment. Bigger down payment allows you to take out a smaller mortgage and get a lower interest rate from the lender. A down payment of at least 20% will also eliminate personal mortgage insurance if you can afford it.

💰 Shop for mortgage lenders. It can help you compare loan offers from multiple mortgage lenders negotiate a better rate. Experts recommend getting at least two to three loan estimates from different lenders.

💰 Consider renting. Choose rent or buy a house not just comparing the monthly rent to the mortgage payment. Renting offers flexibility and low upfront costs, but buying allows you to build wealth and have more control over your housing costs.

💰 Consider mortgage points. You can get a lower mortgage rate by buying mortgage pointseach point is 1% of the total loan amount. One mortgage point equals a 0.25% reduction in your mortgage interest rate.

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