Today's Mortgage Rates | Rates Inch Down on Encouraging Inflation Data

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• Mortgage rates for January 16, 2025, are hovering in the high 6% range.
• Rates decreased slightly this week thanks to cooler-than-expected inflation data.
• But inflation needs to continue cooling for rates to drop further, and Trump's policies could have the opposite effect.

After months of stickiness, inflation is starting to show signs that it's cooling down again. Cooler-than-expected consumer price index data has helped push mortgage rates lower this week and makes it more likely we'll see rates trend down more later this year.

In December, the CPI rose 2.9% on an annual basis. Though this is an uptick from the previous month, investors appeared to be more interested in the core inflation numbers, which strip out the volatile food and energy categories.

Core CPI came in unexpectedly lower, rising 3.2% year over year after spending the last three months stuck at 3.3%.

"Despite the uptick in overall prices, which was largely driven by a surge in energy prices that accounted for 40% of the monthly pickup, the core readings suggest slow progress toward the inflation target continues," Realtor.com chief economist Danielle Hale wrote in her reaction to the data.

Mortgage rates are unlikely to drop substantially unless inflation slows further, so this latest data is good news. But it's still unclear if inflation will slow enough for the Federal Reserve to continue cutting rates this year, especially with a new administration moving into the White House next week.

Economists have flagged some of President-elect Trump's proposed policies as potentially inflationary, which means the Fed may have a difficult time getting inflation back down to its 2% target, even as it currently appears to be easing. If inflation remains elevated or ticks up, mortgage rates probably won't go down.

What Are Today's Mortgage Rates?

What Are Today's Refinance Rates?

Mortgage Calculator

Use our free mortgage calculator to see how today's interest rates will affect your monthly payments.

By clicking on "More details," you'll also see how much you'll pay over the entire length of your mortgage, including how much goes toward the principal vs. interest.

Current 30-Year Mortgage Rates

Average 30-year mortgage rates are hovering in the upper 6% range, according to Zillow data. Rates averaged around 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.

Current 15-Year Mortgage Rates

Average 15-year mortgage rates are in the low 6% range, according to Zillow data. In December, 15-year rates averaged 5.32%.

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.

Current Mortgage Refinance Rates

Refinance rates have been similar to purchase rates recently. In December, 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 Rate Affect Mortgage Rates?

The Fed increased the federal funds rate dramatically in 2022 and 2023 to try to slow economic growth and get inflation under control. Inflation has since slowed significantly, but it's still a bit above the Fed's 2% target rate.

Mortgage rates aren't directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy 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 policy to affect the broader economy.

The Fed lowered rates three times in 2024, but it may not cut as much in 2025. This means mortgage rates may only ease a little bit this year.

Will Mortgage Rates Drop in January 2025?

Mortgage rates probably won't drop substantially in January, but we could see some temporary fluctuations as markets react to new economic data.

Mortgage rates are starting 2025 elevated compared to where they've been in recent months. Rates could drop a bit in January if incoming data shows that inflation is slowing more than expected, but recent data has been somewhat sticky.

How Low Will Mortgage Rates Go?

Mortgage rates are unlikely to drop back down to the historic lows of 2020 and 2021, when 30-year fixed rates fell below 3%. But rates are expected to continue to ease throughout the next year or two, and it's possible rates could ultimately settle in closer to 6% in the next couple of years.

Will Mortgage Rates Go Down in 2025?

Most major forecasts expect mortgage rates to go down throughout 2025 as the Fed continues to lower its benchmark rate. But because mortgage rates are influenced by the economy, this forecast could change depending on how the economy evolves this year.