Homebuyers can usher in 2026 with a little relief as mortgage rates fell to the lowest level of 2025 in the final report of the year.
Freddie Mac’s latest Primary Mortgage Market Survey, released Wednesday, showed the average rate on the benchmark 30-year fixed mortgage decreased to 6.15% from last week’s reading of 6.18%.
The average rate on a 30-year loan started the year around 7%.
“After starting the year close to 7%, the average 30-year fixed-rate mortgage moved to its lowest level in 2025 this week, an encouraging sign for potential homebuyers heading into the new year,” said Sam Khater, Freddie Mac’s chief economist.
Mortgage rates are not directly affected by the Fed’s interest rate decision but closely track the 10-year Treasury yield. The 10-year yield hovered around 4.14% as of Wednesday afternoon ahead of the New Year’s holiday.
Earlier this week, the National Association of Realtors reported home sales in November rose 3.3% with gains in all regions of the U.S.; the Northeast, Midwest, South and West, a sign the market is improving.
Lower borrowing costs may help housing affordability, which has been an issue for the economy, while other metrics show more improvement under President Donald Trump.
Earlier this month, the Bureau of Economic Analysis released its initial estimate of third-quarter GDP, which showed the economy grew at an annualized rate of 4.3% in the three-month period including July, August and September. That figure topped the expectations of economists polled by LSEG, who had estimated 3.3% GDP growth in the third quarter.
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And inflation, while above the Federal Reserve’s 2% mandate, is coming down.
The Bureau of Labor Statistics said on Thursday that the consumer price index rose 0.2% in November from the prior month, while it increased to 2.7% on a year-over-year basis. Both of the figures were cooler than the expectations of economists polled by LSEG, who projected a 0.3% monthly rise and a 3.1% year-over-year figure.
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Still, the job market remains a wildcard with hiring soft across most sectors.
In November, employers added 64,000 jobs in November. The unemployment rate ticked up to 4.6% for November, the highest since September 2021.
The minutes from the Federal Reserve’s December meeting showed two voting members of the Federal Open Market Committee dissented in favor of leaving rates unchanged, while one dissented in favor of a larger 50 basis point cut. Further, six officials released economic projections suggesting that they were opposed to a cut.
“Most participants” voted in favor of a cut, while “some” of those policymakers argued that it was an appropriate forward-looking strategy that would “help stabilize the labor market” amid a recent slowdown in job creation. However, others “expressed concern that progress towards the committee’s 2% inflation objective had stalled.”
The Fed cut rates by 25 basis points for the third straight time at their December meeting, lowering the benchmark federal funds rate to a range of 3.5% to 3.75%. The decision occurred against the backdrop of a slowing labor market with inflation elevated above the Fed’s 2% target, a dynamic which puts both sides of the central bank’s dual mandate at risk.
This week, Trump again lashed out at Chairman Powell, calling him a “fool” for letting the renovations of the central bank’s headquarters run over budget. Trump has said he will name a new Fed chair pick to replace Powell in January.
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