Mortgage forecast for the week of January 13-19: Everything to know about rates

Average rate on 30-year fixed mortgage It remained above 7% over the past week, its highest level in six months.

Rising borrowing costs have led to a sharp decline in home purchases throughout 2024, and buyers are still not flocking to the market. During the first week of the new year. Mortgage applications were 15% lower Compared to the same time last year, according to the Mortgage Bankers Association.

Several factors have led to interest rates rising this winter. Strong economic data declined Expectations of interest rate cuts by the Federal Reserve It caused ten-year Treasury yields (a key benchmark for home loan interest rates) to rise. Concern about the incoming Donald Trump administration It will fuel inflation The government debt deficit has shaken the mortgage market.

Based on the current situation, A Significant decline in mortgage rates Before the spring home-buying season, this is unlikely to be possible Valerie Saunderschief executive strategist at the National Association of Mortgage Brokers.

Absent a drop in inflation or a sudden weakness in business conditions, mortgage rates will remain near 7% for a while, he said. Keith GambingerVice President of Mortgage Website HSH.com.

What will affect mortgage rates this month?

With so much uncertainty in financial markets, interest rates could see significant increases and fluctuations this month, especially with the presidential inauguration on January 20 approaching.

“As to whether or not we will see a recalibration over the next few weeks, that depends on what the president-elect says and what he will do when he actually takes office,” he said. Jacob channelchief economist at LendingTree. If Trump declared an economic emergency to impose tariffs or did something like declare war on Denmark, mortgage rates would rise even more, Channel said.

The week after Trump takes office, the Federal Reserve will hold its first policy meeting of the year.

Although economists believe the Fed will do so Leave interest rates unchanged On January 29, investors will be looking for any clues about how expectations will shift with the new administration. The Fed has already made three interest rate cuts since September, but with no evidence of lower or lower inflation Weaker labor marketIt may take some time until we see additional discounts.

The Fed influences the direction of overall borrowing rates however It does not directly control the mortgage market. Investors care about the Fed’s expectations on interest rate adjustments because it affects their trading strategy and risk assessment. That’s why market forces often move in anticipation of Fed policy moves, relying on economic data and forecasts to price their expectations in the bond market.

“Since the rise in bond yields is due to anticipation of future events, if the narrative changes, bond yields may change,” he said. Kara ngchief economist at Zillow.

Mortgage rates may see more volatility in 2025

Aside from the usual daily fluctuations, Mortgage rates It is expected to remain above 6.5% over the next few months. If inflation continues to slow and the Fed is able to implement two 0.25% cuts, mortgage interest rates may do so. inches down to 6.25% Later in the year.

But a new administration, changes in geopolitical expectations, and the risk of an inflation rebound all have the potential to change those expectations significantly.

Investors also react to political announcements and… Policy changesThere will not be much stability in the mortgage market. “Unless the president-elect’s tone becomes more moderate and disciplined once he takes office, expect volatility to remain prevalent,” Channel said.

While a sharp decline in interest rates is not impossible, it would take a sudden economic shock, such as the onset of a recession or a rise in oil prices, for home loan interest rates to shift. “Rascal changes in trend are usually the result of some significant event emerging somewhere that turns the financial markets upside down,” Gumbinger said.

What will affect the housing market in 2025?

today Unsustainable housing market Consequences of higher mortgage rates, a Long-standing housing shortagesRising house prices and loss of purchasing power due to inflation.

🏠 Low housing stock: A balanced housing market typically has five to six months of supply. Most markets today average about half that amount. according to Freddie MacWe still have a shortage of about 3.7 million homes.

🏠 High mortgage Rates: In early 2022, mortgage rates reached historic lows 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, pushing millions of potential buyers out of the housing market.

🏠 Rate lock effect: Since the majority of homeowners are Locked in mortgage rates Below 5%, they are reluctant to give up low mortgage rates and have little incentive to list their homes for sale, leaving a scarcity of resale inventory.

🏠 House prices rise: Although demand for home purchases has been limited in recent years, home prices remain high due to a lack of inventory. The average price of homes in the United States was $429,963 in November, up 5.4% year over year, according to Redfin.

🏠 Severe inflation: Inflation means an increase in the cost of basic goods and services, which leads to a decrease in purchasing power. It also affects mortgage rates: when inflation is high, lenders usually raise interest rates on consumer loans to ensure a profit.

Is it better to wait or buy?

It’s never a good idea to rush into this Buying a house Without knowing what you can afford, so set a clear budget for your home purchase. Here’s what experts recommend before buying a home:

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

💰 Save for a larger down payment. greater Initial payment It allows you to get a smaller mortgage and get a lower interest rate from your lender. If you can afford it, a down payment of at least 20% will also void your private mortgage insurance.

💰 Shop for mortgage lenders. Comparing loan offers from multiple mortgage lenders can help you Negotiate a better price. Experts recommend getting at least two or three loan estimates from different lenders.

💰 Consider renting. choose for Rent or buy a house It’s not just comparing your monthly rent to your mortgage payment. Renting offers flexibility and lower 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 pointsThe cost of each point is 1% of the total loan amount. One mortgage point equals a 0.25% decrease in your mortgage rate.

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