Home buyers and refinancers got some welcome news this week as mortgage rates reached their lowest average level since September 2022.
The average rate on a 30-year fixed-rate mortgage fell 11 basis points to 5.91% APR in the week ending Jan. 15, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.
The drop follows last week’s social media post from President Trump ordering government-sponsored enterprises Fannie Mae and Freddie Mac to buy $200 billion in mortgage-backed securities. That move would provide an influx of cash to lenders, who can lower rates knowing they have a guaranteed buyer.
Despite the celebration around lower rates, a big “what if” hangs in the background this week. Critics note that Fannie’s and Freddie’s risky buys of mortgage-backed securities contributed to the 2008 financial crisis.
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Home buyers watch and wait
Despite the drop in mortgage rates, buyers are still at the mercy of who’s selling. In January, a predictably slow season for the housing market, listings are scarce. Unsold inventory decreased 18.1% from November to December, reports the National Association of Realtors.
“Inventory levels remain tight,” NAR chief economist Lawrence Yun said in a news release. “With fewer sellers feeling eager to move, homeowners are taking their time deciding when to list or delist their homes. Similar to past years, more inventory is expected to come to market beginning in February.”
For those lucky enough to take advantage of this week’s sudden rate plunge and get an offer accepted: Congratulations, you’ve earned bragging rights among all your house-hunting friends … at least until the market thaws this spring.
Refinancers rejoice
On the other hand, mortgage refinance activity is immediately sensitive to changes in rates. When rates drop, homeowners can move fast to lock in a lower rate. (No trudging through open houses in the snow required.)
For the week ending Jan. 9, refinance applications jumped 40% compared to the previous week — a 128% increase over the same period last year, reports the Mortgage Bankers Association. In January 2025, the 30-year fixed rate mortgage hovered around 7%.
In general, it’s smart to run the numbers on a refinance when today’s mortgage rates are 0.5 to 0.75 of a percentage point lower than your existing rate. That’s when the cost savings tend to outweigh upfront refinance closing costs.
Gimme five!
If seeing a 5.99% mortgage rate makes you feel more optimistic than a 6.01% rate, you’re not alone. While the basis point difference may be small, the psychological barrier between 5% and 6% is a big one for today’s home buyers.
It’s like turning 40. Technically, you’re only one day older — but you’re feeling the weight of a whole new decade.
A vibe check is a fine place to start your homebuying journey, but you need a budget to know how much house you can afford, regardless of what mortgage rates are doing.
