When the Federal Reserve finally began cutting interest rates this fall, homebuyers were eager for relief from more than two years of high mortgage rates. Although the Fed cut the interest rate by another 0.25% at its policy meeting on December 18, the wait for affordable mortgage rates is getting longer, not shorter.
For a 30-year fixed-rate mortgage, the average rate you’ll pay today is 6.99%, down -0.02% from a week ago. The average rate for a 15-year fixed mortgage is 6.29%, down -0.01% from last week.
Economists worry that President-elect Donald Trump’s proposed economic policies could cause inflation to rise again, which would mean the pace of interest rate cuts would slow even further in 2025. While the mortgage market is volatile and changes daily, average mortgage rates are likely to remain above 6% for some time.
What’s going on with mortgage rates right now
After consumers and borrowers received very low interest rates at the start of the pandemic, the Fed began hiking its benchmark interest rate in 2022 to combat inflation and cool the economy. Mortgage rates rose in response, peaking at over 8% in 2023.
The central bank’s recent move to cut interest rates is, in theory, good news for the housing market. With each cut the Fed makes, it becomes less expensive for banks and corporations to borrow money, allowing them to lower rates on consumer loans, including mortgages. However, the Fed doesn’t directly set home loan rates. Many economic factors, including investor expectations, geopolitical events and the bond market, influence whether mortgage rates rise or fall.
To see the fluctuations in mortgage rates over the past four years, see the chart below.
What’s in store for mortgage rates in 2025
For the near future, Trump’s re-election is likely to lead to tariffs and tax cuts, said Chen Zhao, head of economic research at Redfin, which bond market investors worry could lead to a bigger deficit and higher price growth. Rising debt levels generally correspond to higher borrowing costs.
Each month brings a new set of inflation and labor data that can change how investors and the market react and cause mortgage rates to rise or fall. Next year’s mortgage market will depend on a number of factors, including fiscal policies, the 10-year Treasury yield, geopolitical conflicts and other macroeconomic and political conditions.
In our 2025 mortgage forecast, experts outlined a rough range between 5% and 7% for the average 30-year fixed mortgage. Most housing market forecasts predict rates to peak around 6.4% late next year.
Lower mortgage rates alone won’t fix today’s housing affordability crisis. Prospective home buyers will still have to contend with sluggish wage growth and a housing shortage that has pushed home prices to record highs.
Here’s a look at average mortgage rates from some major housing authorities.
Which Mortgage Term and Type Should I Choose
Each mortgage has a loan term or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. With a fixed-rate mortgage, the interest rate is set for the duration of the loan, which provides stability.
With an adjustable-rate mortgage, the interest rate is fixed for only a certain amount of time (usually five, seven or 10 years), after which the rate adjusts annually based on the market. Fixed-rate mortgages are a better choice if you plan to stay in the home for a long time, but adjustable-rate mortgages may offer a lower interest rate initially.
30-Year Fixed-Rate Mortgage
The average interest rate for a standard 30-year fixed mortgage today is 6.99%. The 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.
15-Year Fixed-Rate Mortgage
Today, the average rate for a 15-year, fixed mortgage is 6.29%. Although you’ll have a higher monthly payment than a 30-year fixed mortgage, a 15-year loan typically comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage quicker.
5/1 Adjustable-Rate Mortgage
The average rate for a 5/1 ARM today is 6.25%. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your home within five years, an ARM could be a good choice.
Calculate your monthly mortgage payment
Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to create a budget and try to live within your means. CNET’s mortgage calculator below can help home buyers prepare for monthly mortgage payments.