Mortgage Rates Rise Again, to 6.93%—but Economists Predict Housing Market Conditions Will Improve

Mortgage rates jumped to a six-month high of 6.93%, up from 6.91% last week, for the average 30-year fixed home loan for the week ending Jan. 9, according to Freddie Mac.

“In the first full week of the new year, the 30-year fixed-rate mortgage remained elevated at just under 7%,” said Sam Khater, Freddie Mac’s chief economist. “The continued strength of the economy has put upward pressure on mortgage rates, and along with high home prices, continues to impact housing affordability.”

Khater also pointed to a continued lack of entry-level inventory, which presents a stumbling block, especially for consumers looking to become first-time homeowners.

“The Freddie Mac rate for a 30-year mortgage climbed this week as the 10-year Treasury surged higher and the market prepared for Friday’s employment report,” says Realtor.com® senior economic research analyst Hannah Jones.

Jones predicts that more rate volatility is possible in the days to come, depending on how closely the hotly anticipated jobs report mirrors expectations—and it will factor into the Federal Reserve’s Open Market Committee that will convene at the end of the month to chart the course for the monetary policy of the U.S.

“A strong, but not too strong, employment report could help settle some economic uncertainty going into the new year,” says Jones. “Convincing evidence of cooling job growth and easing inflation will be important in bringing mortgage rates lower.”

The housing market went into a deep freeze in December, experiencing the slowest seasonal slowdown in nearly two years, with properties lingering unsold for an average of 70 days. This was partly due to surging mortgage rates, which reached a six-month high.

More than three-quarters of prospective homebuyers said it was a bad time to shop for properties last month. Meanwhile, the “lock-in”effect making homeowners unwilling to list their houses on the market out of fear of having to give up their existing low mortgage rates has remained firmly in place, creating a situation where there was little interest all around in either buying or selling.

However, an uptick in new, pending, and existing-home sales in November suggests that reluctant buyers have started to adjust to the above-6% mortgage rates.

“Nevertheless, more significant market recovery hinges on falling rates,” Jones warns. “We expect housing conditions to improve in 2025, with slightly lower mortgage rates and more for-sale inventory.”

What’s to come in 2025?

The Realtor.com 2025 housing forecast projects that mortgage rates will average 6.3% across 2025. Meanwhile, home sales are expected to increase by 1.5% this year.

On top of that, inventory is expected to get an above-average seasonal boost in the spring and remain high through the summer months, presenting consumers with a wider array of options.

Realtor.com economists say that home prices are set to increase throughout 2025 at a rate of 3.7%, egged on by slightly lower mortgage rates and an 11.7% uptick in existing for-sale inventory compared year over year.

Last month, the Fed cut a key interest rate by a quarter-point in its third rate reduction. It is now anticipated that the central bank will slash rates only twice this year instead of the previously predicted four times.

Because investors had foreseen the Fed’s latest rate cut, it has already been baked into the long-term bond markets, which steer mortgage interest rates.