January Mortgage Outlook: New Year, Same Rates

It’s possible that mortgage rates may see a slight decrease in January, but it’s more likely that they will remain stable. While fluctuations occur daily, a significant change this month seems improbable.

The government shutdown in October disrupted the flow of data from federal agencies, making it challenging to assess the economy’s condition. The rate cuts by the Federal Reserve in October and December were uncertain due to the lack of data. Currently, the consensus in the market is that the Fed will likely maintain the current rates at their upcoming meeting on Jan. 27-28. However, this is not a definite decision but rather a probability.

While the Federal Reserve does not directly dictate mortgage rates, market expectations surrounding the Fed’s actions often influence market sentiment. The Fed’s decisions are like a pivotal moment at a party, where markets and lenders adjust their strategies based on the Fed’s data-driven choices announced every six weeks. The uncertainty surrounding the Fed’s next move has created a cautious atmosphere in the markets.

The uncertainty surrounding the last few Fed meetings in 2025 made it difficult for mortgage lenders to set rates confidently. This period can be likened to pretending to be busy on your phone at a party when you’re unsure of what to do.

In 2025, average rates on 30-year fixed-rate mortgages remained relatively stable in the low six percent range from October to December. However, there was a significant disparity in rates offered by different lenders, indicating their struggle to interpret market signals and economic conditions accurately.

This uncertainty is likely to persist in January as the market awaits the Fed’s next move. Prospective homebuyers and refinancers are advised to compare offers from multiple lenders to capitalize on potential savings during this period of rate dispersion.

As we enter a new year, the aftermath of the government shutdown lingers, impacting the flow and reliability of economic data. The accuracy of recent data has been questioned due to the missing information from October.

If the data continuity between November and December shows signs of easing inflation but continued job market challenges, the economic outlook could become clearer. This scenario may lead to a decline in mortgage rates as expectations of a Fed cut increase.

On the other hand, mixed or conflicting data in December could prolong the period of uncertainty as economists strive to distinguish genuine economic trends from data anomalies. In such a scenario, mortgage rates are likely to remain stable.

In December, both the Mortgage Bankers Association and Fannie Mae maintained their 2026 predictions. MBA anticipates stable rates throughout the year, while Fannie Mae expects a gradual decline over the next 12 months.