Today's Mortgage Rates - 01/14/2025

No Respite From Rate Rise

Mortgage rates crept higher again this week.

As reported by Freddie Mac, the average offered interest rate for a conforming 30-year fixed-rate mortgage (FRM) edged higher by two basis points (0.02%), settling at 6.93% in the first full week of 2025.

Average offered rates for 15-year fixed-rate mortgages barely moved, but the slight move was upward, as a one basis point (0.01%) increase left the most popular short-term mortgage at 6.14%, the highest level since last summer.

A 5/1 ARM might offer a homebuyer a lower-cost alternative to a long-term fixed-rate mortgage, and the difference in rate between 30-year FRMs and 5/1 ARMs expanded just barely this week. The Mortgage Bankers Association said that the initial fixed interest rate on a hybrid 5/1 ARM increased by one basis point (0.01%) to 5.98%. Coupled with the slightly larger move by it's long-term fixed-rate cousin, the 95 basis point (0.95%) gap in rate may be considerable enough to entice some winter homebuyers to select this as their financing choice.

For a $300,000 loan taken at the average rates above, the 5/1 ARM would provide a monthly principal and interest payment that is $187 per month lower than would be the case for a the 30-year fixed. Over the fist five years of the loan, this translates into $14,400 in interest savings, and an additional reduction in the outstanding loan balance of nearly $3,100.

Recent reports don't suggest much by way of economic slowing, or at least not the kind that would cause interest rates to decline very much. Minutes of the December Fed meeting suggested that it was a close call to trim rates, in that "A majority of participants noted that their judgments about this meeting's appropriate policy action had been finely balanced." Even as "Some participants stated that there was merit in keeping the target range for the federal funds rate unchanged," the "vast majority of participants viewed it as appropriate to lower the target range for the federal funds rate by 25 basis points." There was also one dissenter to the move, a Committee member who thought holding steady was a preferable policy, given uncertainties.

In light of this and with pretty solid economic fundamentals still evident, expectations for rate cuts by the Fed continue to be ratcheted down. Futures markets place about a 93% probability of no move at the January FOMC meeting, only about a 41% chance come March. Even a cut in May is currently given only a little better than a 50/50 odds of happening.

Looking over markets at the moment, there is still some upward pressure on mortgage rates being expressed, and sales of 10-year Treasury bonds this week were said to have been met with only average demand despite attractively high yields and equity markets that have been stumbling along. With this as a backdrop, mortgage rates are likely to press a little higher still in the coming days.

Each week in HSH's MarketTrends newsletter, we track and discuss economic conditions that affect mortgage rates and their impact on housing markets and consumers. Read the most recent edition of MarketTrends or subscribe for email delivery.