Mortgage rates edge closer to 7%

New year, same high rates — at least that’s how 2025 is starting out, with rates now approaching 7%. But there are signs that homebuyers are shrugging it off as they reset expectations.

The 30-year fixed-rate mortgage rate averaged 6.91% this week, according to the latest Freddie Mac survey. That’s the highest level since July and up significantly from a year ago, when rates averaged 6.62%.

Mortgage News Daily, which uses a different set of criteria to measure mortgage rates, pegged the 30-year rate at 7.07% on Jan. 2, with few fluctuations in recent days.

Buyers ‘no longer waiting’

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The upward trend in rates that began earlier in the fall hasn’t seemed to slow down activity, however. Pending home sales in November jumped 2.2% compared to October and were up 6.9% year-over-year in all regions, according to data released earlier this week by the National Association of Realtors.

Increases were highest in the West (up 11.8% year-over-year), followed by the South (up 8.5%), Northeast (up 5.6%) and the Midwest (up 1.6%).

“Consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory,” said NAR Chief Economist Lawrence Yun.

Noting that rates have remained above 6% for more than two years, Yun said “buyers are no longer waiting” for big declines, and they’re now “in a better position to negotiate as the market shifts away from a seller’s market.”

‘Feeling the heat’ of high rates — but still forging ahead

Despite predictions of gradually easing mortgage rates, several factors have combined to keep rates elevated. Key among them are the Federal Reserve’s forecast of fewer rate cuts in 2025 and concerns about inflation in the year ahead.

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“With the embers of the post-pandemic inflation fire still burning, mortgage rates are getting stuck near 7% and the housing market is feeling the heat,” said Joel Berner, senior economist at Realtor.com.

The market might still be suffering, but homebuying activity picked up, at least through November. Along with the jump in pending sales, existing and new home sales were both up year-over-year.

December experienced its traditional holiday slowdown, according to Realtor.com’s monthly trends report, but inventory is up 17.5% compared to a year ago. That could provide opportunities for winter buyers who want to get ahead of the busier spring season, said Danielle Hale, chief economist at Realtor.com.

Mortgage applications fall

The recent rise in mortgage rates and the Christmas holiday put a damper on mortgage applications, according to the Mortgage Bankers Association. Even when adjusting for the holiday, applications were down 21.9% compared to two weeks earlier.

“Not surprisingly, this increase in rates — at a time when housing activity typically grinds to a halt — resulted in declines in both refinance and purchase applications,” said Mike Fratantoni, MBA’s chief economist.