Mortgage rates close out 2025 at 15-month low
Though lower mortgage rates are improving affordability, economists warn that many potential homebuyers will still be “priced out” in the new year.
Mortgage rates continued to provide a bit of holiday cheer this week, drifting to the lowest levels of the year and setting up 2026 for more favorable rate conditions than seen at the start of 2025.
Mortgage rates drop to 2025 low: The 30-year fixed-rate mortgage averaged 6.15% this week — the lowest level of 2025, according to Freddie Mac. Rates haven't changed much in the past few weeks, hovering around 6.2% since late November.
However, rates are significantly lower than a year ago, when the 30-year rate averaged 6.91% and went on to spike above 7% in mid-January. Rates haven't been lower than the level reported on Dec. 31 since early October 2024, according to Freddie Mac data.
The 15-year fixed-rate was also lower this week, averaging 5.44% compared to 5.5% one week ago. The 15-year rate hit its lowest level of the year — 5.41% — in September and again in October.
Mortgage News Daily, which uses a different set of criteria to determine the average rate, found that rates have been mostly flat in recent days and pegged the 30-year rate at 6.2% on Dec. 31.
Though new sets of economic data are expected to be released in the next two weeks — a jobs report is slated for release on Jan. 9 and the next major inflation report comes out on Jan. 13 — mortgage rates may not move much in the meantime.
Many still 'priced out' of the market: While mortgage rates have taken a step in the right direction in terms of affordability, it is likely going to take several years of lower rates, slower home price growth and increasing household incomes to make significant progress, said Lisa Sturtevant, chief economist at Bright MLS.
"Falling mortgage rates can definitely help with affordability, but many homebuyers are still going to be priced out in 2026," Sturtevant said, noting that the monthly payment for a median priced home is still about $2,740.
A better spring on the way? Even with those affordability constraints, there is some hope for a stronger spring homebuying season compared to the past three years, according to Joel Berner, senior economist at Realtor.com.
"Already pending home sales have responded to the relief from mortgage rates and are helping the market pick up steam through what is traditionally the slowest part of the year," Berner said.
In November, pending sales were up 2.6% year-over-year, according to the National Association of Realtors. Signed contracts typically show up in closed sales a month or two later.