Mortgage rates have dropped to their lowest level of 2025, bringing a sense of relief to homebuyers as they prepare for the new year. According to Freddie Mac’s latest Primary Mortgage Market Survey, the average rate for a 30-year fixed mortgage fell to 6.15%, decreasing from 6.18% the previous week. At the start of 2025, rates were near 7%.
Improving Housing Affordability
Sam Khater, Freddie Mac’s chief economist, noted that the recent decline in mortgage rates offers hope to potential buyers. With lower borrowing costs, housing affordability, a persistent issue, may be improved. Despite the decrease in rates, the housing market faces challenges.
- Average 30-year fixed mortgage rate: 6.15%
- Starting rate in January 2025: Around 7%
- Home sales increase: 3.3% in November
Market Trends
Recent data from the National Association of Realtors highlighted a 3.3% rise in home sales in November, with an uptick across all U.S. regions: Northeast, Midwest, South, and West. This suggests signs of improvement in the housing market as inventory gradually increases.
Economic Overview
The economic backdrop includes a growing GDP, which rose at an annualized rate of 4.3% in the third quarter, exceeding economists’ forecasts of 3.3%. Although inflation remains above the Federal Reserve’s 2% target, it has shown signs of moderation.
- GDP growth for Q3: 4.3%
- Inflation increase in November: 0.2% monthly, 2.7% year-over-year
Job Market Challenges
Despite these positive indicators, the job market poses risks. November saw the addition of 64,000 jobs; however, the unemployment rate rose to 4.6%, the highest level since September 2021. This mixed picture emphasizes the challenges ahead for policymakers.
Federal Reserve’s Position
The Federal Reserve recently cut rates by 25 basis points for the third consecutive time, now setting the federal funds rate between 3.5% and 3.75%. This decision reflects a response to a sluggish labor market and ongoing inflation concerns, raising questions about future monetary policy direction.
Overall, the recent drop in mortgage rates provides a glimmer of hope for homebuyers as they navigate the evolving housing landscape at the start of 2026.
