Mortgage Rates End the Year on a High Note
As the year comes to a close, mortgage rates have taken a notable upswing, leaving them slightly higher than where they started. According to Freddie Mac data, the average 30-year fixed-rate mortgage rate has climbed to 6.85% for the week ending Wednesday, marking a significant increase from 6.72% just a week prior. Meanwhile, average 15-year mortgage rates have also seen a jump, rising from 5.92% to 6%.
A Rebound After a Brief Decline
The recent surge in mortgage rates marks a reversal of the decline seen earlier this month. Sam Khater, Freddie Mac’s chief economist, attributes this shift to a slight improvement in new and existing home sales, which has helped to build momentum heading into the new year. However, Khater notes that the market remains constrained by a severe undersupply of homes, a challenge that continues to plague the industry.
The Federal Reserve’s Influence
The latest increase in mortgage rates can be traced back to the Federal Reserve’s recent meeting, where central bank officials signaled a slower pace of interest rate cuts in 2025. This news sent mortgage rates rising, as they tend to move in tandem with expectations about future interest rates. The Fed’s decision to cut benchmark interest rates only twice next year, rather than the four times anticipated by many analysts, has contributed to the upward trend in mortgage rates.
A Choppy Year for Mortgage Rates
Looking back on 2024, 30-year mortgage rates have experienced a rollercoaster ride, fluctuating between 6% and 7%. After peaking in May at 7.22%, rates fell significantly over the summer, reaching a low of 6.08% in September. However, uncertainty surrounding President-elect Donald Trump’s economic policies, coupled with the Fed’s revised rate-cutting timeline, has pushed rates closer to 7% once again.
What’s Next for the Housing Market?
As the housing market looks to the new year, one thing is clear: the path forward will be shaped by a complex interplay of factors, including interest rates, economic policies, and supply and demand. With mortgage rates ending the year on a high note, it remains to be seen how this will impact purchase activity and the overall health of the housing market in 2025.
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