Mortgage rates fell on Thursday to their lowest level in more than three years following President Donald Trump‘s announcement of a $200 billion mortgage-backed securities (MBS) buyback plan aimed at improving housing affordability.
The average rate on 30-year fixed home loans dropped to 6.06% for the week ending Jan. 15, down 10 basis points from 6.16% the week before, according to Freddie Mac. For perspective, rates averaged 7.04% during the same period in 2024.
“Late last week, mortgage rates dropped, driving the weekly average down to its lowest level in more than three years,” said Sam Khater, Freddie Mac’s chief economist. “The impacts are noticeable, as weekly purchase applications and refinance activity have jumped, underscoring the benefits for both buyers and current owners. It’s clear that housing activity is improving and poised for a solid spring sales season.”
The last time rates were in the low 6% range was in September 2022, when they registered at 6.02%.
After dropping to record lows during the COVID-19 pandemic, mortgage rates first climbed above the 6% threshold in fall 2022 and have remained elevated since, putting homeownership out of reach of many Americans and fueling a persistent mortgage “lock-in effect” that has stalled inventory recovery.
Last week, Trump, who has been focused on affordability ahead of the November midterm elections, ordered government-backed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities (MBS).
“The announcement triggered a sharp decline in mortgage rates as MBS prices surged, since higher MBS prices generally translate into lower borrowing costs for consumers,” says Realtor.com® senior economic research analyst Hannah Jones. “This source of rate volatility largely overshadowed the December jobs report, which sent mixed signals, with softer-than-expected payroll growth alongside an improved unemployment rate.”
December existing-home sales increased both month over month and year over year as buyers responded to easing mortgage rates and gradually improving inventory levels.
At the same time, the share of homeowners with mortgage rates above 6% now exceeds the share below 3%, signaling a gradual shift in the housing market as some homeowners with ultralow-rate outstanding mortgages begin to trade up or move despite higher current borrowing costs.
“We expect mortgage rates to remain relatively steady in the low 6% range this year, which could support modestly improving home sales in 2026,” says Jones. “Even so, affordability constraints and the remaining stock of low-rate mortgages suggest any recovery in home sales is likely to be gradual rather than rapid.”
Mortgage rates are determined by a delicate calculus that factors in the state of the economy and an individual’s financial health. They are most closely linked to the 10-year Treasury bond yield, which reflects broader market trends, like economic growth and inflation expectations. Lenders reference this benchmark before adding their own margin to cover operational costs, risks, and profit.
When the economy flashes warning signs of rising inflation, Treasury yields typically increase, prompting mortgage rates to go up. Conversely, signs of falling inflation or weakness in the labor market usually send Treasury yields lower, causing mortgage rates to fall.
The mortgage rates you’re offered by a lender, however, go beyond these benchmarks and take some of your personal factors into account.
Your lender will closely scrutinize your financial health—including your credit score, loan amount, property type, size of down payment, and loan term—to determine your risk. Those with stronger financial profiles are deemed as lower risk and typically receive lower rates, while borrowers perceived as higher risk get higher rates.
Your credit score plays a role when you apply for a mortgage. A credit score will determine whether you qualify for a mortgage and the interest rate you’ll receive. The higher the credit score, the lower the interest rate you’ll qualify for.
The credit score you need will vary depending on the type of loan. A score of 620 is a “fair” rating. However, people applying for a Federal Housing Administration loan might be able to get approved with a credit score of 500, which is considered a low score.
Homebuyers with credit scores of 740 or higher are typically considered to be in very good standing and can usually qualify for better rates.
Different types of mortgage loan programs have their own minimum credit score requirements. Some lenders have stricter criteria when evaluating whether to approve a loan. They want to make sure you’re able to pay back the loan.