Mortgage Predictions for Week of Jan. 13-19: Everything to Know About Rates
The average rate is 30-year fixed mortgage It has remained above 7% for the past week, its highest level in six months.
Soaring borrowing costs have led to a sharp decline in home purchases throughout 2024, but buyers have yet to flood the market. In the first week of the new year, Mortgage applications down 15% That’s up from the same time last year, according to the Mortgage Bankers Association.
Several factors are pushing rates higher this winter. Strong economic data downgrades Expectations for a Fed rate cut And caused the 10-year Treasury yield, a key benchmark for home loan rates, to surge. Worried about Donald Trump’s incoming administration will cause inflation Rising government debt deficits have roiled the mortgage market.
According to the current situation, Mortgage rates drop sharply Reportedly unlikely before spring home buying season Valerie SandersCEO Strategist, National Association of Mortgage Brokers.
It said that if inflation does not decline or labor conditions suddenly worsen, mortgage rates will remain near 7% for some time. Keith Gumbingervice president of mortgage website HSH.com.
What will affect mortgage rates this month?
With significant uncertainty in financial markets, interest rates are likely to see significant spikes and volatility this month, especially around the presidential inauguration on January 20.
“As to whether we see a realignment in the next few weeks, that depends on what the president-elect says and what he actually does when he takes office,” said Jacob ChannelSenior Economist at LendingTree. The channel said that if Trump declares an economic emergency to impose tariffs or take action such as declaring war on Denmark, mortgage rates will move higher.
A week after Trump takes office, the Federal Reserve will hold its first policy meeting of the year.
Although economists believe the Fed will Keep interest rates unchanged On January 29, investors will be looking for clues on how the new administration might change the outlook. The Fed has cut interest rates three times since September, but there is no evidence of falling inflation or a slowing economy. Weak labor marketit may be a while before we see further cuts.
The Fed affects the direction of overall borrowing rates, but Does not directly control the mortgage market. Investors are concerned about the prospect of interest rate changes by the Federal Reserve because it affects their trading strategies and risk assessments. That’s why market forces often move in response to expectations of Fed policy moves, relying on economic data and forecasts to price their expectations for the bond market.
“Because the rise in bond yields is due to expectations of future events, if the narrative changes, bond yields may change,” he said. Wu KaraZillow senior economist.
Mortgage rates could see more volatility in 2025
In addition to typical day-to-day fluctuations, mortgage interest rate It is expected to remain above 6.5% in the coming months. Mortgage rates could fall if inflation continues to cool and the Fed is able to cut interest rates twice by 0.25% inches dropped nearly 6.25% later this year.
But the arrival of a new administration, changes in the geopolitical outlook and the risk of a rebound in inflation could significantly change this forecast.
As investors react to political announcements and Policy changesthe mortgage market will not have much stability. “Unless the president-elect’s tone becomes more moderate and disciplined after taking office, volatility is expected to continue to be widespread,” the channel said.
While a significant drop in interest rates is not out of the question, it would take a sudden economic shock, such as the onset of a recession or a spike in oil prices, for home loan rates to turn around. “A sharp change in direction is usually the result of some major event somewhere that upends financial markets,” Gambinger said.
What factors will affect the real estate market in 2025?
Today’s unaffordable housing market The result of high mortgage rates chronic housing shortageexpensive housing prices and loss of purchasing power due to inflation.
🏠 Low housing inventory: A balanced housing market typically has five to six months of supply. The average volume in most markets today is about half that number. according to Freddie Macwe are still short of approximately 3.7 million housing units.
🏠 Increase your mortgage Rate: In early 2022, mortgage rates hit historic lows around 3%. Mortgage rates more than doubled as the Federal Reserve raised interest rates to curb inflation as it soared. Mortgage rates remain high through 2025, causing millions of potential buyers to exit the housing market.
🏠 Rate lock effect: Since most homeowners are Lock in your mortgage rate If it’s below 5%, they’re unwilling to give up lower mortgage rates and have no incentive to list their homes, leading to a lack of resale inventory.
🏠 High housing prices: Although demand for home purchases has been limited in recent years, home prices remain high due to a lack of inventory. The median home price in the United States is $429,963 Data from Redfin showed year-over-year growth of 5.4% in November.
🏠 Rapid inflation: Inflation means the cost of basic goods and services increases, thereby reducing purchasing power. It also affects mortgage rates: When inflation is high, lenders often raise interest rates on consumer loans to ensure profits.
Is it better to wait or buy?
Rushing is never a good idea buy a house Without knowing what you can afford, create 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 what the interest rate will be. one credit score 740 or higher will help you qualify for lower rates.
💰 Save more down payment. bigger down payment Allows you to apply for a smaller mortgage and obtain a lower interest rate from the lender. If you can afford it, a down payment of at least 20% will also eliminate private mortgage insurance.
💰 Shop for mortgage lenders. Comparing loan quotes from multiple mortgage lenders can help you Negotiate a better price. Experts recommend getting at least two to three loan estimates from different lenders.
💰Consider renting. choose Rent or buy a house Don’t just compare your monthly rent to your mortgage payment. Renting offers flexibility and lowers upfront costs, but buying allows you to build wealth and have more control over housing costs.
💰 Consider mortgage points. You can get a lower mortgage rate by buying mortgage pointseach point costs 1% of the total loan amount. One mortgage point is equivalent to a 0.25% decrease in the mortgage interest rate.
