Unlock the Latest Mortgage Rates: What to Expect on January 5, 2025!

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• Mortgage rates on January 5, 2025, are hovering around 6.70%.
• By year-end, rates are projected to settle in the low 6% range.
• Even if affordability remains a challenge, purchasing a home may become easier due to a larger inventory of available properties.

Mortgage rates are anticipated to ease this year, but may not drop significantly enough to offer substantial relief for homebuyers.

Many experts expect mortgage rates to decline to the low 6% range this year. For instance, 30-year rates are projected to reach 6.20% by the close of 2025, as noted by Realtor.com. Currently, rates are hovering around 6.70%, according to recent Zillow data.

Consider a $200,000 loan at a 6.70% rate, which results in a monthly mortgage payment of $1,291. If rates dip to 6.20%, that payment drops to $1,225—saving you $66 monthly, or about $800 each year.

Nonetheless, even if rates remain static, it might still be a smart move to buy a home in 2025. With an expected increase in inventory, home price growth is likely to moderate, making it easier for buyers to find the right property.

Current Mortgage Rates

Current Refinance Rates

Mortgage Calculator

Try out our free mortgage calculator to see how today’s rates could influence your monthly payments. By entering different rates and terms, you’ll gain insight into your total costs over the life of your mortgage.

Click “More details” for tips on how to save money on your mortgage in the long run.

30-Year Mortgage Rates Today

Current 30-year mortgage rates are in the high 6% range, with an average of around 6.42% in December.

The 30-year fixed-rate mortgage remains the most favored loan type. This mortgage option allows you to repay over 30 years with a fixed rate throughout the loan term.

This extended term means lower monthly payments, making it easier on your budget, though it comes with a higher rate compared to shorter terms like a 15-year mortgage.

15-Year Mortgage Rates Today

Average 15-year mortgage rates are currently around 6%, compared to an average of 5.82% in December.

If you prefer the stability of a fixed rate and wish to minimize interest payments over the life of your loan, a 15-year fixed-rate mortgage might be right for you. With shorter terms and lower rates than 30-year options, you could save tens of thousands in interest, though your monthly payments will be higher.

Average Mortgage Refinance Rates Today

Refinance rates are currently on par with purchase rates. Last month, 30-year refinance rates averaged 6.52%, while 15-year refinance rates hovered around 5.88%.

How Much Do Mortgage Rates Need to Drop to Refinance?

If you’re considering refinancing, crunching the numbers is essential. Experts recommend refinancing if you can lower your rate by at least one percentage point, but it ultimately depends on your personal financial situation.

Calculate your potential savings by dividing your closing costs by the amount you save on your monthly mortgage payment. For instance, if refinancing costs you $3,000 and you save $200 per month, you’d break even in 15 months.

5-Year Mortgage Rate Trends

Take a look at how 30-year and 15-year mortgage rates have fluctuated over the past five years, based on Freddie Mac data.

What Factors Influence Mortgage Rates?

Mortgage rates are shaped by a variety of factors, including broader economic trends, Federal Reserve policies, your state’s mortgage rates, the type of loan you’re applying for, and your personal financial profile.

While many elements are beyond your control, you can still take steps to improve your credit score, reduce debt, and save for a larger down payment to secure the best rate.

How Does the Fed Rate Affect Mortgage Rates?

The Fed has raised the federal funds rate significantly in 2022 and 2023 to curb inflation. While inflation is slowing, it still hovers slightly above the Fed’s target rate of 2%.

Mortgage rates aren’t directly influenced by changes in the federal funds rate; however, they often respond to investor demand for mortgage-backed securities, which is shaped by expectations surrounding Fed policies and the economy.

The Fed reduced rates three times in 2024, though cuts might not be as aggressive in 2025, suggesting only slight easing in mortgage rates this year.

How Low Will Mortgage Rates Go?

With ongoing uncertainty in the economy, predicting the final destination of mortgage rates is tricky. While some declines are expected, they’re unlikely to return to the historic lows we saw in 2020 and 2021 when 30-year fixed rates dipped below 3%. Rates are projected to stabilize around the 6% mark.

How Do Mortgage Rates Work?

Your mortgage interest rate dictates how much you’ll pay to borrow money for your home. Each month, you’ll make payments that contribute to both your principal and the interest owed.

As time passes, the interest portion of your monthly payment decreases through a process called amortization. As you pay down your mortgage, the loan balance reduces, lowering your overall interest costs.

For example, with a $300,000 mortgage at a 6.5% interest rate, your monthly payment would be about $1,896. Initially, only $271 of that payment would go towards your principal, while $1,625 covers interest. Fast forward 20 years, and $992 of that same payment would apply to the loan balance, with about $905 going toward interest.

Request an amortization schedule from your lender to see how your payments break down over the life of your loan or try an online amortization calculator.

How Often Do Mortgage Rates Change?

Mortgage rates can fluctuate throughout the day, shifting day-to-day or week-to-week depending on economic conditions. In stable times, rates might remain steady, but uncertainties can lead to significant changes.

How to Shop for Mortgage Rates

Mortgage lenders do not all offer the same rates, meaning shopping around could lead to substantial savings.

Experts advise obtaining quotes from at least three lenders to gauge the range of available rates. If you’re still early in your home search, apply for preapproval to get an estimated rate while house hunting. For those under contract, apply for regular approval to gain a clearer understanding of your costs.

Evaluate the entire offer. If a lower rate comes with high fees, it may not be worth it. Also, consider other essential factors like customer service and down payment assistance.