Mortgage Rates Fall as Housing Market Shows Improvement

According to a recent report, homebuyers can approach 2026 with a more optimistic outlook, primarily because mortgage rates have dropped to their lowest levels in 2025. This information was shared by Jenna Stauffer, a Sotheby’s International Real Estate Broker, who appeared on Morning with Maria to discuss the ongoing challenges of housing affordability.

Freddie Mac’s latest Primary Mortgage Market Study indicated that the average interest rate for a 30-year fixed mortgage decreased slightly from 6.18% to 6.15%. This drop is significant, especially since the average rate has hovered around 7% throughout the year.

Sam Cater, Freddie Mac’s chief economist, commented that this decline in mortgage rates is certainly encouraging for those looking to buy homes as they head into the new year, considering rates had been nearly 7% for quite some time.

It’s worth noting that while mortgage rates aren’t directly influenced by the Federal Reserve’s decisions, they are closely tied to the yield on the 10-year Treasury bond. As of Wednesday, ahead of the New Year’s festivities, the Treasury yield was around 4.14%.

This week, the National Association of Realtors also reported a 3.3% increase in home sales for November, with improvements noted across all regions in the United States. This suggests a positive shift in the housing market.

Lower borrowing costs could lead to better housing affordability—an ongoing concern in the economy. However, some indicators suggest continued improvement under President Trump. Earlier this month, the Bureau of Economic Analysis unveiled its initial GDP forecast for the third quarter, noting an annual growth rate of 4.3%—which surpassed economists’ estimates of 3.3%.

Despite inflation remaining above the Federal Reserve’s target of 2%, there are signs it’s decreasing. The Bureau of Labor Statistics reported a 0.2% rise in the consumer price index for November compared to the previous month, and a 2.7% increase year-over-year—both of which were below economists’ forecasts.

On a different note, the job market continues to present challenges, with employment figures showing weaknesses across most sectors. In November, employers added only 64,000 jobs, and the unemployment rate ticked up to 4.6%, the highest since September 2021.

Minutes from the Federal Reserve’s December meeting revealed some dissent among policymakers regarding interest rate decisions. Two voting members showed reluctance to keep rates unchanged, while another opposed a significant 50 basis point cut. Despite a majority favoring rate cuts, concerns about stalling progress towards the Fed’s inflation target were raised.

In December, the Fed reduced rates by 25 basis points for the third consecutive time, resulting in a new benchmark range of 3.5% to 3.75%. This decision came amid a slowing labor market and rising inflation, complicating the central bank’s overarching goals.

Adding to the drama, President Trump criticized Fed Chairman Jerome Powell, labeling him “stupid” for exceeding budget on renovations at the central bank’s headquarters. Trump has indicated plans to nominate a new Fed chair to replace Powell in January.