Unlock Today’s Best Mortgage Rates: January 4, 2025 Insights!

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• As of January 4, 2025, mortgage rates are around 6.70%.
• With the Federal Reserve’s recent rate cuts, expect mortgage rates to trend downward.
• However, persistent inflation could limit the extent of this drop in the near term.

Mortgage rates have been hanging around the high 6% range for a few weeks, but the outlook suggests a gradual decline as we move through 2025.

As inflation eases, the Federal Reserve is likely to continue lowering the federal funds rate, paving the way for lower mortgage rates.

Last year, the Fed slashed rates by a full percentage point, and policymakers are eyeing two more quarter-point reductions this year. The catch? These cuts hinge on persistent inflation, which has been surprisingly resilient recently.

In September 2024, the PCE price index—the Fed’s go-to inflation measure—rose by 2.1% year-over-year, just above the Fed’s 2% target. By November, it ticked up to 2.4%.

While policymakers remain optimistic that inflation is slowing, they caution it may take longer than anticipated to stabilize.

What does this mean for you? In the short term, mortgage rates are likely to stay near their current levels, but there’s potential for a gradual drop as we approach the next Fed move.

What Are Today’s Mortgage Rates?

What Are Today’s Refinance Rates?

Mortgage Calculator

Discover how today’s interest rates impact your monthly payments with our free mortgage calculator.

Click “More details” to see your total mortgage cost, including principal and interest breakdowns.

Current 30-Year Mortgage Rates

Average 30-year mortgage rates are stabilizing in the upper 6% range, with December rates averaging around 6.42%.

The 30-year fixed-rate mortgage remains the most popular choice in the U.S. This allows for a long repayment period with a fixed interest rate, making monthly payments more manageable but typically resulting in higher overall costs compared to shorter terms.

Current 15-Year Mortgage Rates

Average 15-year mortgage rates sit around 6%, showing a slight decrease from December’s 5.32% average.

This option might suit you if you want a fixed rate but are looking to minimize interest payments over the life of your loan. The trade-off is a higher monthly payment.

Current Mortgage Refinance Rates

Refinance rates are currently on par with purchase rates, with December showing an average of 6.52% for 30-year refinance loans and 5.88% for 15-year loans.

How Much Do Mortgage Rates Need to Drop to Refinance?

Thinking about refinancing? Crunch the numbers to determine if it makes sense for you. Many experts suggest refinancing only if you can lower your rate by at least a percentage point. However, your decision should be based on your unique financial situation.

If refinancing saves you enough each month to cover your costs within a reasonable time frame, it could be worthwhile. To calculate this, divide your closing costs by your monthly savings. For instance, if you spend $3,000 to refinance and reduce your payment by $200, you’ll break even in 15 months.

5-Year Mortgage Rate Trends

Check out how 30-year and 15-year mortgage rates have evolved over the last five years with data from Freddie Mac.

What Factors Influence Mortgage Rates?

Mortgage rates are influenced by a myriad of factors, including broader economic trends, Federal Reserve policies, your state’s current rates, the type of loan you’re considering, and your personal financial profile.

While some of these factors are beyond your control, you can improve your chances of securing a favorable rate by boosting your credit score, reducing debt, and saving for a larger down payment.

How Does the Fed Rate Affect Mortgage Rates?

The Fed raised the federal funds rate significantly in 2022 and 2023 to curb inflation. While inflation is showing signs of decline, it still exceeds the Fed’s target of 2%.

Mortgage rates aren’t directly influenced by the federal funds rate, but they often react in anticipation of Fed policy changes due to investor demand for mortgage-backed securities.

With the Fed having lowered rates three times in 2024, the future may see only modest reductions for mortgage rates.

Will Mortgage Rates Drop in January 2025?

While a decrease in rates is possible this month, they are more likely to remain stable around current levels.

Mortgage rates kick off 2025 at higher levels compared to recent months, and a drop in January hinges on whether inflation data indicates a more significant slowdown.

How Low Will Mortgage Rates Go?

While rates are not expected to return to the historic lows of 2020 and 2021 when 30-year fixed rates fell below 3%, a gradual easing is anticipated over the next couple of years, potentially settling around 6%.

Will Mortgage Rates Go Down in 2025?

Most forecasts indicate mortgage rates will decline throughout 2025 as the Fed continues to lower its benchmark rate. However, this forecast depends on overall economic conditions as the year progresses.