Mortgage rates eased for the second consecutive week, but homebuyers continue to face high borrowing costs. The average 30-year mortgage rate remains just below 7%, affecting affordability as the spring homebuying season approaches.

Mortgage Rates See Minimal Decline

The average rate on a 30-year fixed mortgage dropped slightly to 6.95% from 6.96% the previous week, according to Freddie Mac. While this marks a small decrease, rates remain significantly higher than a year ago when they averaged 6.63%.

Rates on 15-year fixed mortgages, commonly used for refinancing, also dipped to 6.12% from 6.16% last week. A year ago, this rate stood at 5.94%.

Economic Factors Driving Mortgage Rates

Mortgage rates are influenced by various economic factors, including:

• Bond Market Movements – Mortgage rates tend to follow the 10-year Treasury yield, which has risen in recent months.
• Federal Reserve Policy – While the Fed does not set mortgage rates, its interest rate decisions impact lending costs. The Fed recently held its benchmark rate steady, signaling caution amid ongoing inflation concerns.
• Market Uncertainty – Tariff discussions and economic policies under the new administration could further affect financial markets and borrowing costs.

Economic Factors Driving Mortgage Rates

Elevated mortgage rates have continued to weigh on the housing market. Although home sales rose in December, 2024 marked the weakest year for sales in nearly three decades.Pending home sales, a key indicator of future transactions, declined 5.5% in December, breaking a four-month streak of increases. Rising inventory levels may benefit buyers who can afford current mortgage rates or make all-cash purchases.

What’s Next for Mortgage Rates?

‍Despite the recent dip, economists expect mortgage rates to remain elevated throughout 2025. Forecasts suggest that the 30-year fixed rate will stay above 6%, with some projections reaching as high as 6.8%.With the Federal Reserve keeping rates unchanged for now, mortgage rates are unlikely to see major declines in the near future. Prospective buyers may need to adjust their expectations as affordability challenges persist.