Mortgage rates could fall in January, but they\u2019re more likely to hold steady. While daily ups and downs are a given, a major shift this month feels like a long shot.<\/p>\n
Fed cut looking unlikely<\/p>\n
October\u2019s government shutdown throttled the flow of data from federal agencies, making it tough to gauge the economy\u2019s health. Neither October nor December\u2019s Federal Reserve<\/a> rate cuts were sure bets, since the central bankers rely on that data, too. Right now, markets think the central bankers will probably maintain current rates at their next meeting Jan. 27-28. But that\u2019s a \u201cprobably,\u201d not a \u201cdefinitely.\u201d<\/p>\n Though the Federal Reserve doesn\u2019t directly set mortgage rates<\/a>, expectations around the Fed\u2019s decisions often set the tone for markets. Pretend it\u2019s a party: Markets (and mortgage lenders) are constantly reading the room and making adjustments based on the vibes. The Fed, on the other hand, arrives fashionably late, using reams of data to make decisions that are announced roughly every six weeks. Markets are always moving and grooving, but whenever the Fed finally makes an appearance, that\u2019s a needle scratch moment \u2014 the music stops and everyone turns to look.<\/p>\n Why mortgage rates aren\u2019t sure where to go<\/p>\n The uncertainty around 2025\u2019s last few Fed meetings made it harder for mortgage lenders to set rates with confidence. If we stick with a party metaphor, this period was the equivalent of pretending to check your phone to try and look busy \u2014 it\u2019s better than admitting you\u2019re not sure what to do.<\/p>\n On one hand, 2025 ended with average rates on 30-year, fixed-rate mortgages staying within a fairly limited range in the low six percents. From October through December, Freddie Mac\u2019s weekly mortgage rate survey showed only a 19-basis-point difference between its high and low points. (A basis point is one one-hundredth of a percentage point.)<\/p>\n But those are averages. Looking at sample 30-year fixed rates advertised online by individual mortgage lenders, we saw an unusually wide range, with differences of more than 50 basis points between the lowest and highest rates. Mortgage lenders set their rates based on numerous factors<\/a>, so there are always differences. Usually, though, if you were to plot them on a graph you\u2019d see a relatively tight cluster. Seeing that level of variation implied lenders were having a tough time gauging the markets and the economy overall.<\/p>\n It\u2019s looking like this situation will persist this month, as the Fed\u2019s next move remains in question. Folks hoping to buy or refinance a home would be smart to compare offers from multiple mortgage lenders<\/a>. Research from Freddie Mac has shown that comparing rate quotes from at least four lenders can save over $1,200 per year. And when we\u2019re seeing this kind of rate dispersion, the potential savings can really start to stack up.<\/p>\n What could clear things up<\/p>\n We\u2019re in a new year, and yet we\u2019re still groping around in a post-shutdown hangover. Federal economic data\u2019s started flowing again, but it\u2019s in fits and starts. There have also been questions about accuracy, since the month of October is essentially a question mark with no data collected.<\/p>\n For example, markets \u2014 and mortgage rates<\/a> \u2014 reacted quite positively to November inflation data that came in lower than expected. But economists (and Federal Reserve Chair Jerome Powell) were wary of the data\u2019s quality given that missing month. \u201cThe data may be distorted,\u201d Powell said in a Dec. 10 press conference, noting later that \u201cwe\u2019re going to have to look at it carefully and with a somewhat skeptical eye.\u201d<\/p>\n If incoming data shows continuity from November to December, with inflation<\/a> easing but the job market still struggling, the economic picture could become much clearer. That would imply that the November numbers were indeed accurate, and we\u2019d likely see mortgage rates go down as expectations of a Fed cut rise.<\/p>\n But if December\u2019s data is mixed or shows a reversal, that could mean an even longer wait-and-see period as economists try to parse legitimate economic trends from noise in the data. Mortgage rates would then, as predicted here, remain roughly stable.<\/p>\n What other forecasters are predicting<\/p>\n In December, the Mortgage Bankers Association and Fannie Mae kept their predictions for 2026 intact. MBA foresees stable rates all year, while Fannie Mae forecasts a slow fall over the next 12 months.<\/p>\n What happened in December<\/p>\n