Today's Mortgage Rates - 01/02/2025

Rates Creep Higher Into New Year

2025 started off with the highest mortgage rates in six months. Here's hoping for better for the rest of 2025 or even over the next couple of months.

Freddie Mac reported today that the average offered interest rate for a conforming 30-year fixed-rate mortgage (FRM) rose by another six basis points (0.06%) to 6.91%, the highest average rate since mid-July.

Average offered rates for 15-year fixed-rate mortgages fared worse, climbing by thirteen basis points (0.13% and lifting the most popular short-term mortgage to 6.13%, also the highest since the 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 this week. The Mortgage Bankers Association said that the initial fixed interest rate on a hybrid 5/1 ARM slipped by fourteen basis points (0.14%) to 5.97%. Presently, the 94 basis point (0.94%) gap in rate compared to a long-term fixed-rate loan renders the choice of this ARM reasonably compelling for homebuyers seeking a break on monthly payments.

A thin calendar of economic data and holidays have left investors plenty of time to ponder the prospects for economic growth and inflation, plus an opportunity to try to reckon the changes in policy likely forthcoming from the incoming Trump administration. With the Fed signaling a slower pace of policy adjustment in 2025 and inflation remaining more stubborn than expected, it's a bit of a wait-and-see and hope-for-the-best time at the moment.

If history is any guide (and it often isn't), changes to trends in interest rates often start to form in the first full week of the new year; that would be next week. A fair bit of fresh data on the labor markets is due, as are the minutes of the December Fed meeting. Both will influence the direction mortgage rates take in the coming week, and perhaps beyond; a softer and less "hawkish" tenor to both might allow mortgage rates to decline somewhat.

The influential bond yields which underlie fixed mortgage rates have been modestly lower over the last few days. While this suggests the increase in mortgage rates has at least stalled, it doesn't suggest that they are showing any signs yet of retreat. As such, look for mortgage rates to be mostly flat around current levels 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.