Mortgage Rates Dip Slightly to 6.96% After Trump Delayed Imposing New Tariffs

Mortgage rates pulled back slightly this week, following new inflation data and signs that President Donald Trump is moderating his position on tariffs.

The average rate on 30-year fixed home loans dipped to 6.96% for the week ending Jan. 23, down from 7.04% the prior week, according to Freddie Mac.

“After crossing the 7%-mark last week, the 30-year fixed-rate mortgage saw its first decline in six weeks,” said Sam Khater, Freddie Mac’s Chief Economist. “While affordability challenges remain, this is welcome news for potential homebuyers, as reflected in a corresponding uptick in purchase applications.”

The small pullback in rates followed new data last week showing that, while overall annual inflation increased to 2.9% in December, so-called core inflation, excluding volatile food and energy prices, rose at the slowest monthly pace since July.

Because cooler inflation is more likely to lead to lower long-term interest rates, yields on 10-year Treasury bonds dropped modestly late last week. Mortgage rates typically follow 10-year yields.

Also benefiting mortgage rates, Trump refrained from immediately imposing new tariffs on foreign imports after taking office on Monday, instead calling for a review of U.S. trade policy before taking action.

His more measured approach to tariffs sent bond yields down slightly, because investors generally view tariffs as inflationary and likely to lead to Federal Reserve rate hikes.

“Falling mortgage rates are welcome news in a housing market that has been largely stymied by them in recent years,” says Realtor.com® Chief Economist Danielle Hale.

“Momentum in the market started to build toward the end of 2024, as evidenced by the increase in pending home sales year over year in November, but rates exceeding 7% last week for the first time since May 2024 will surely gum up the gears going forward,” she adds.

Prices are finally falling, but there’s a catch

The Realtor.com economic research team’s weekly housing market update shows that for the week ending Jan. 18, the median list price of homes on the market this week was down 2.2% from the same week last year.

This week was the 35th in a row in which the national median home listing price was either flat or falling on an annual basis, a stretch that dates back to May 25th.

However, the decline appears to be primarily due to the rising share of smaller homes hitting the market, as homebuilders pivot toward smaller, more affordable floorplans.

When the change in the mix of inventory toward smaller homes is accounted for, the median listing price per square foot increased by 1% this week compared with the same time last year.

New listings surge in positive trend for buyers

The number of new listings hitting the market last week surged 17.9% from one year ago despite mortgage rates hitting 7%, possibly signaling that time and life changes driving moves are finally chipping away at the mortgage “lock-in” effect for home sellers.

It marked the highest number of new listings to the market since October, in a positive sign for buyers to kick off the new year.

The past two weeks have brought the most new listings so far this winter, according to the report.

Supply and time on market are rising

The number of homes listed for sale last week was up 25.1% from the same week a year ago, marking the 63rd consecutive week of annual growth in supply.

Meanwhile, the typical home spent four more days on the market before going under contract, compared to a year earlier.

Median days on market increased to 70 last month, the highest level for a December since 2019.

Time on market follows seasonal trends and typically peaks in January due to the lower number of new listings coming on to the market.