Mortgage Rates Inch Up to Nearly 7%—the Highest in 6 Months Even as Pending Home Sales Rise

Mortgage rates inched up again, from 6.85% last week to 6.91% for the average 30-year fixed home loan for the week ending Jan. 2, according to Freddie Mac.

“Inching up to just shy of 7%, mortgage rates reached their highest point in nearly six months,” said Sam Khater, Freddie Mac’s chief economist. “Compared to this time last year, rates are elevated and the market’s affordability headwinds persist. However, buyers appear to be more inclined to get off the sidelines as pending home sales rise.”

The Freddie Mac rate is now at its highest level since early July 2024 and nearly 30 basis points higher than it was in the first days of 2024, says Joel Berner, a senior economist with Realtor.com®

“This follows closely on the heels of the 10-year Treasury yield reaching 4.63% last week in the wake of the December Federal Reserve meeting in which a plan for fewer-than-expected rate cuts in 2025 was announced,” Berner adds. “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.”

The central bank slashed a key interest rate by a quarter-point late last month in its third cut of the year, with policymakers now anticipating just Fed rate two cuts in the new year instead of the four that had been predicted back in September. 

Because investors had anticipated the central bank’s latest rate cut, it has already been factored into the long-term bond markets, which are the primary drivers of mortgage interest rates.

December saw the strongest seasonal slowdown of the residential real estate market in nearly two years, with homes standing unsold for an average of 70 days, up from 62 in November.

Home inventory also dropped 8.6% from November, marking the largest slump since January 2023, says Realtor.com senior economist Ralph McLaughlin in his December monthly housing report.

An uptick in mortgage rates, combined with a dearth of home stock and high listing prices, had all conspired to keep would-be buyers on the sidelines over the holiday season, even as the “lock-in” effect remained firmly in place for homeowners. 

In other words, potential buyers were reluctant to buy and potential sellers were reluctant to sell, making December 2024 the slowest December since 2019.     

The housing market outlook for 2025

The Realtor.com® economic research team projects that mortgage rates will average 6.3% through 2025 and end 2024 at around 6.2%, setting the stage for a more buyer-friendly market.

Economists also expect that the lowering of rates will give the sluggish market the shot in the arm it needs by spurring cagey homeowners to list more properties in the coming months, which, in turn, would boost inventory levels and attract hesitant buyers who have been biding their time.

“Though these high mortgage rates are a serious affordability headwind for prospective homebuyers who are already struggling with high listing prices that continue to grow, there are some positive indicators that the market is still chugging along,” Berner explains.

Namely, the most recent releases of pending home sales, new-home sales, and existing-home sales data showed year-over-year growth, signaling that buyers by now have accepted the high 6% mortgage rates as “the new normal” and are starting to become more active.

“For those with a new year’s resolution of buying a home, we expect to see 2025 usher in continued growth in the inventory of homes for sale,” says Berner. “So even if mortgages remain expensive, prospective homebuyers should have more options to choose from in the new year.”