If you’re in the market for a new home or looking to refinance your mortgage with an APR around 6%, January might be the perfect time to start shopping.
The average 30-year fixed mortgage rate increased by six basis points to 5.97% in the week ending January 22, according to data provided by Zillow to BW. A basis point represents one one-hundredth of a percentage point.
Rates remained stable at 5.97% in the week ending January 1 and have shown minimal fluctuations in the following three weeks, despite some daily ups and downs.
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Federal Reserve likely to maintain current rates
During the upcoming Federal Reserve meeting on January 27-28, it is widely anticipated that the central bank will keep the overnight borrowing rate unchanged. This rate, known as the federal funds rate, affects how banks borrow from each other to finance loans like mortgages. Typically, mortgage rates follow the direction of this rate. With analysts predicting the rate to remain between 3.5%-3.75%, any inaction by the Fed is unlikely to steer lenders far from current rates.
The Bureau of Labor Statistics released the personal consumption expenditure report (PCE) for October and November this morning. The report revealed a year-over-year inflation increase of 2.7% and 2.8% respectively, moving further away from the Fed’s target of 2%. Coupled with a steady job market, the Fed may not have sufficient reason to lower rates at this time, potentially delaying any rate cuts for the remainder of the quarter.
Impact of Davos on Mortgage Rates
Aside from the Federal Reserve, lenders are also closely monitoring other factors that influence mortgage rates, such as 10-year treasury yields, which are influenced by various elements including fiscal policies, economic forecasts, and global events.
Currently, attention is focused on President Trump and other officials gathering in Davos, Switzerland for the World Economic Forum. Recent announcements by Trump regarding potential tariffs on certain countries caused market turbulence, resulting in a 33 basis points spike in the average 30-year mortgage rate.
Following Trump’s retraction of the tariff threats and indications of progress in negotiations, the 10-year Treasury yield decreased, leading to a decline in mortgage rates on Wednesday and Thursday.
Potential Impact of New Fed Chair on Mortgage Rates
Looking ahead, the announcement of the next Fed chair could provide insights into mortgage rate trends for the latter half of the year. Treasury Secretary Scott Bessent suggested in an interview from Davos that the president may reveal his choice for the new Fed chair in the coming week.
President Trump’s public stance on lowering rates and the alignment with the new chair selection could have implications for mortgage rates post the departure of current chair Jerome Powell in May. Analysts are poised to analyze the impact of this announcement on future rate movements.
An earlier version of this article incorrectly stated the dates of the upcoming Federal Reserve meeting. The correct dates are January 27-28. This error has been rectified.