Average rate on 30-year mortgage eases for second week in as row, but remains just below 7%

[January 31, 2025]  By ALEX VEIGA

The average rate on a 30-year mortgage in the U.S. eased for the second week in a row, but remains just below 7%, little relief for prospective home shoppers looking ahead to the spring homebuying season.

The rate fell to 6.95% from 6.96% last week, mortgage buyer Freddie Mac said Thursday. A year ago, it averaged 6.63%.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners seeking to refinance their home loan to a lower rate, also eased this week. The average rate dropped to 6.12% from 6.16% last week. A year ago, it averaged 5.94%, Freddie Mac said.

Mortgage rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy decisions. The average rate on a 30-year mortgage briefly fell to a 2-year low just above 6% last September, but has been mostly rising since then, echoing a sharp rise in the 10-year Treasury yield, which lenders use as a guide for pricing home loans.

The yield, which was at 3.62% in mid-September, reached 4.79% two weeks ago amid fears inflation may remain stubbornly higher than the Fed's 2% target. A solid U.S. economy and worries about tariffs and other policies potentially coming from President Donald Trump have also helped push bond yields higher.

The 10-year Treasury yield was at 4.53% in midday trading Thursday.

Elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers, prolonging a national home sales slump that began in 2022.

While sales of previously occupied U.S. homes rose in December for the third month in a row, 2024 was the worst year for home sales in nearly 30 years, worse than 2023, which had been the worst in decades.

“Driven by these higher rates and a persistent supply shortage, affordability hurdles still exist for many homebuyers and a significant number of them remain on the sidelines,” said Sam Khater, Freddie Mac’s chief economist.

New data on pending home sales points to potentially further declines in coming months. The National Association of Realtor’s pending home sales index fell 5.5% in December from the previous month, ending a four-month streak of increases, the trade group said Thursday. Pending transactions fell 5% compared to December 2023.

A lag of a month or two usually exists between when a contract is signed and when the home sale is finalized, which makes pending home sales a bellwether for future completed home sales.

As home sales have slowed, the inventory of properties on the market has been increasing. While still low by historical standards, the number of homes for sale nationally is up nearly 25% this month from a year ago, according to Realtor.com.

That’s good news for home shoppers who can afford to buy with mortgage rates at current levels or pay all cash.

For those hoping that mortgage rates will come down significantly, however, economists say that's unlikely.

Several economists’ forecasts call for the average rate on a 30-year mortgage to remain above 6% this year, with some including an upper range as high as 6.8%.

The Federal Reserve left its benchmark interest rate unchanged Wednesday after cutting it three times in a row last year, a sign of a more cautious approach as the Fed seeks to gauge where inflation is headed and what policies the Trump administration will pursue.

While the Fed doesn’t set mortgage rates, the central bank’s decision to keep its main interest rate unchanged likely means mortgage rates won’t budge much in the near term.

"With the Fed on hold, we do expect that longer-term rates, including mortgage rates, will also stay within a narrow range for the foreseeable future,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.

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