Today's Mortgage Rates - 01/28/2025

Rates Slide Down A Little

Mortgage rates broke a five-week string of increases this week.

As reported by Freddie Mac today, the average offered interest rate for a conforming 30-year fixed-rate mortgage (FRM) declined by eight basis points (0.08%) this week, easing to 6.96%. While the first decline since the week of December 12, it wasn't even enough to erase the increase of a week ago.

Average offered rates for 15-year fixed-rate mortgages managed a slightly more meaningful decrease, falling by eleven basis points (0.11%) to 6.16%. As with its longer-term sibling, the decline here also didn't offset the previous week's increase.

A 5/1 ARM might offer a homebuyer a lower-cost alternative to a long-term fixed-rate mortgage, but the difference in rate between 30-year FRMs and 5/1 ARMs narrowed considerably this week. The Mortgage Bankers Association said that the initial fixed interest rate on a hybrid 5/1 ARM rose by another twenty-three basis points (0.23%) to 6.41%. Coupled with the downward move by its long-term fixed-rate cousin, this closed the gap in rate to just 55 basis points (0.55%). This slightly-better-than-a-half-percentage-point gulf might no longer be considerable enough to entice some winter homebuyers to select an ARM as their choice of financing, even though there may be some savings.

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 $109 per month lower than it would be for a the 30-year fixed loan. Over the first five years of the mortgage, this translates into $8,296 in interest savings, and an additional reduction in the outstanding loan balance of more than $1,733.

Even without much fresh economic data to consider, it has been a busy week for investors. The Monday market holiday also brought the Presidential inauguration, and with it a series of swift and sweeping changes to policies and practices.

Of particular interest to homebuyers and homeowners was the directive contained in the Executive Order seeking to deliver "emergency price relief" to Americans. In it, the order noted that "many Americans are unable to purchase homes due to historically high prices, in part due to regulatory requirements that alone account for 25 percent of the cost of constructing a new home," and directs the heads of all executive departments and agencies to pursue "appropriate actions to lower the cost of housing and expand housing supply." and report to the President every 30 days on progress.

It remains to be seen what this actually becomes. Most folks buy existing, not new houses, and there isn't much that can be done by executive order to increase supplies of existing homes to buy, lower the asking prices of them or reduce mortgage rates. Re-balancing the housing market will take time; new construction will play a part, but the larger issues of supply and price will likely remain for some time yet.

The best bet for getting mortgage rates down is to see inflation be tamed, and damping the things that might create future inflation. Whether this can be achieved by the incoming administration and the Fed remains to be seen. At present, underlying yields that influence mortgage rates are firming slightly, so expect to see steady to modestly higher mortgage rates in the coming few 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.