US mortgage rates at 2025-low give homebuyers momentum in New Year

US MORTGAGE rates have reached their lowest point for the year, potentially injecting fresh momentum into a homebuying market that spent much of 2025 in the doldrums.

The average for 30-year, fixed loans dropped to 6.15 per cent this week, data from Freddie Mac showed on Wednesday (Dec 31). That’s down from around 7 per cent in January and “an encouraging sign for potential homebuyers heading into the new year”, said Sam Khater, Freddie Mac’s chief economist.

Many industry watchers are upbeat. In general, homes are expected to get cheaper in real terms: Wage growth is poised to far outpace gains in prices. That would put purchases in closer reach of more Americans, even if mortgage rates don’t come down much further.

Determined buyers may not need much more encouragement to act on pent-up demand. A measure of contracts to buy resale homes has climbed for four straight months and in November reached its highest point since early 2023, the National Association of Realtors reported this week. 

That has helped the market “to pick up steam through what is traditionally the slowest part of the year”, said Joel Berner, senior economist for Realtor.com. “If this momentum continues into the peak buying season of 2026, we could see much stronger sales figures than we saw for much of 2025.” 

There’s little argument that affordability kept many prospective buyers on the sidelines this year. And housing remains too expensive for many people. While prices have long since cooled from the pandemic-era frenzy, they are still rising, especially in places where listings remain in short supply. 

Many would-be sellers have been holding out as well, as still-elevated rates offer them little incentive to give up the cheap loans they landed a few years ago and move. In recent months, some have pulled their listings to wait for a more opportune time.

If the market does turn around next year, it will be off a very low base. Completed purchases of previously owned homes have approached 30-year lows in 2023, 2024 and 2025. Even with a 6.3 per cent increase in 2026, the median of the predictions collected by Bloomberg earlier this month, sales would still have a long way to go before they reach pre-pandemic levels. 

The most optimistic projections are based on the labor market holding up – always a wild card. A wave of layoffs sparked by artificial intelligence, for example, would especially hit younger workers and undermine the housing recovery, according to Mark Zandi, chief economist at Moody’s Analytics.

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As for mortgage rates, little movement is expected for the foreseeable future. And the Federal Reserve, which cut its benchmark rate three times in 2025, has hinted at just one or two cuts for 2026. BLOOMBERG