Today's Mortgage Rates | Rates Inch Closer to 7% as Fed Cuts Look Less Likely

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• Mortgage rates for January 14, 2025, are around 6.90%.
• Hotter-than-expected economic data has pushed mortgage rates up recently.
• If inflation doesn't slow and the Fed stops cutting rates, mortgage rates may remain elevated this year.

Federal Reserve policymakers recently indicated that they expect to make two cuts to the federal funds rate this year, which would help mortgage rates go down. But new data has made it less likely that those cuts will happen.

Last week, the Bureau of Labor Statistics reported that the U.S. economy added more jobs than expected in December and that the unemployment rate ticked down.

This hot jobs report pushed the 10-year Treasury yield up, and mortgage rates followed suit.

Strength in the labor market makes it less likely that the Fed will be able to cut rates this year, especially since inflation has been somewhat sticky in recent months. Traders are now betting that we'll only get one cut by the end of 2025, according to CME FedWatch. The likelihood that the Fed won't cut rates at all has also risen in recent weeks.

Now, all eyes are on Wednesday's consumer price index data. In November, the CPI rose 2.7% on an annual basis, a slight uptick from the previous month. And the Federal Reserve Bank of Cleveland's inflation nowcast suggests that inflation may have sped up further last month.

If inflation remains stubborn, we may not see mortgage rates go down at all this year.

Mortgage Rates Today

Mortgage Refinance Rates Today

Mortgage Calculator

Use our free mortgage calculator to see how today's mortgage rates will affect your monthly and long-term payments.

By plugging in different term lengths and interest rates, you'll see how your monthly payment could change.

30-Year Mortgage Rates

Average 30-year mortgage rates are hovering around the upper 6% range, according to Zillow data. This rate was 6.42% in December.

The 30-year fixed-rate mortgage is the most popular home loan. With this type of mortgage, you'll pay back what you borrowed over 30 years, and your interest rate won't change for the life of the loan.

The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you'll have a higher rate than you would with shorter terms, like a 15-year mortgage.

15-Year Mortgage Rates

Average 15-year mortgage rates have been hovering above 6%, according to Zillow data. In December, 15-year rates averaged 5.82%.

If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you'll have a higher monthly payment than you would with a longer term.

ARM Rates

Rates on adjustable-rate mortgages have been higher than fixed rates in recent days. Last month, the average mortgage rate for a 7/1 ARM was 6.53%, while the average rate for a 5/1 ARM was 6.69%, according to Zillow data.

When you get an ARM, you'll have a fixed mortgage rate for a certain period of time, after which your rate will adjust periodically. On a 7/1 ARM, for example, your rate will stay fixed for seven years, and then adjust once a year after that until you pay off the loan or refinance.

ARM rates are often (but not always) lower than their fixed-rate counterparts, making an ARM a good deal if you're looking to save on your monthly mortgage payment. But the risk with an ARM is that your monthly payment could increase if rates are up when your rate starts adjusting.

FHA Interest Rates

FHA interest rates were 5.58% last month, but they're in the low 6% range today.

FHA loans are insured by the Federal Housing Administration. This federal backing allows lenders to work with borrowers with lower credit scores and less money for a down payment, making these loans a good option for low-income and first-time homebuyers. They also typically have lower rates compared to conventional mortgages.

To get an FHA loan, you'll need a credit score of at least 580 and a down payment of 3.5%. If you can afford to put 10% down on a house, you could qualify for an FHA loan with a score down to 500, though not all lenders offer this option.

VA Mortgage Rates

Current VA mortgage rates are around 6.30%, according to Zillow data. Last month, VA rates averaged 5.82%.

VA loans are available to veterans and military members who meet minimum service requirements. They're backed by the Department of Veterans Affairs, and require no down payment or mortgage insurance.

Mortgage Refinance Rates

Refinance rates are similar to purchase rates. Last month, 30-year refinance rates averaged 6.52%, while 15-year refinance rates were around 5.88%.

How Much Do Mortgage Rates Need to Drop to Refinance?

If you're wondering if you should refinance now, you'll need to crunch the numbers to see if it makes sense. Some experts advise only refinancing if you can reduce your rate by a percentage point or more, but it really comes down to whether it works for your individual circumstances.

If you can save enough each month by refinancing that you can recoup your costs in a reasonable amount of time, it might be worth it. You can calculate this by dividing your closing costs by the amount you're saving on your monthly mortgage payment. So, if you paid $3,000 to refinance and were able to lower your monthly payment by $200, it would take you 15 months to break even on your refinance.

5-Year Mortgage Rate Trends

Here's how 30-year and 15-year mortgage rates have trended over the last five years, according to Freddie Mac data.

What Factors Influence Mortgage Rates?

Mortgage rates are determined by a variety of different factors, including larger economic trends, Federal Reserve policy, your state's current mortgage rates, the type of loan you're getting, and your personal financial profile.

While many of these factors are out of your control, you can work on improving your credit score, paying off debt, and saving for a larger down payment to ensure you get the best rate possible.

How Does the Fed Affect Mortgage Rates?

The Fed aggressively raised the federal funds rate in 2022 and 2023 to slow economic growth and get inflation under control. As a result, mortgage rates spiked.

Mortgage rates aren't directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy.

The Fed lowered rates three times in 2024, but it's expected to slow its pace in 2025. This means mortgage rates may only drop a little bit this year.

Mortgage Rate Predictions 2025

Mortgage rates are expected to ease slightly this year. However, that forecast could change depending on how the economy evolves. Right now, the Fed is poised to achieve a so-called "soft landing," where it successfully brings inflation back down to its 2% target without sparking an economic downturn. But inflation is taking a bit longer than expected to fully come down, which may keep rates elevated in the near term.

If inflation doesn't fall further, we may not see mortgage rates drop much — or at all — this year.