US mortgage rates drop below 6% for the 1st time in nearly 4 years
In an aerial view, two-story single family homes line the streets of neighborhood on January 13, 2026 in Thousand Oaks, California. (Kevin Carter/Getty Images)
(NEW YORK) — The rate on a 30-year fixed mortgage dropped below 6% for the first time in nearly four years, according to new data from Freddie Mac.
Rates have been hovering around 6% this year and averaged 6.76% last February.
“For the first time in three and a half years, the 30-year fixed-rate mortgage dropped into the 5% range, falling even lower than last week’s milestone,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “This rate, combined with the improving availability of homes for sale, is meaningful and will drive more potential buyers into the market for spring homebuying season.”
This is a developing story. Please check back for updates.
A for sale sign is seen in front of a house in a Spring Branch neighborhood in Houston, Monday, Oct. 27, 2025. Kirk Sides/Houston Chronicle via Getty Images
(NEW YORK) — Mortgage rates this week fell to their lowest level in 15 months, easing borrowing costs for homebuyers eager for a thaw in the housing market in 2026.
The average interest rate on a 30-year fixed mortgage stands at 6.15%, plummeting from a level of 6.89% in May, data from financial services company Freddie Mac showed. Last January, the average 30-year fixed mortgage rate exceeded 7%.
Each percentage point decrease in a mortgage rate can save thousands or tens of thousands in additional cost each year, depending on the price of the house, according to lender Rocket Mortgage.
Sam Khater, the chief economist at Freddie Mac, called the drop in mortgage rates an “encouraging sign for potential homebuyers heading into the new year.”
Mortgage rates closely track the yield on a 10-year Treasury bond, or the amount paid to a bondholder annually. Bond yields are shaped in part by expectations of the benchmark interest rate set by the Federal Reserve.
The sharp drop in mortgage rates over the latter half of 2025 owed in part to data showing a slowdown in hiring, which heightened expectations that the Fed would slash interest rates in an effort to boost the ailing labor market.
Starting in September, the Fed cut interest rates at three consecutive meetings, bringing the benchmark rate to a level between 3.5% and 3.75%. That figure marks a significant drop from a recent peak attained in 2023, but borrowing costs remain well above a 0% rate established at the outset of the COVID-19 pandemic.
After the Fed’s most recent rate cut in December, Fed Chair Jerome Powell suggested the central bank may be cautious about further rate reductions.
“We’re well positioned to wait and see how the economy evolves,” Powell said.
The housing market is suffering from a phenomenon known as the “lock in” effect, some experts previously told ABC News.
While mortgage rates have fallen, they remain well above the rates enjoyed by most current homeowners, who may be reluctant to put their homes on the market and risk a much higher rate on their next mortgage.
In turn, the market could continue to suffer from a lack of supply, making options limited and prices sticky.
Mixed results in recent economic data have clouded the outlook for the economy — and in turn, interest rates.
A jobs report released two weeks ago showed sluggish hiring and an uptick in the unemployment rate. Unemployment remains low by historical standards but has inched up to its highest level in years.
Days later, a report on gross domestic product defied concerns stoked by the hiring slowdown. The U.S. economy grew at a robust annualized rate of 4.3% in the third quarter in the government’s initial estimate, marking an acceleration from 3.8% growth recorded in the previous quarter, U.S. Commerce Department data showed.
Futures markets expect two quarter-point interest rate cuts next year, forecasting the first in April and a second in the fall, according to CME FedWatch Tool, a measure of market sentiment.
Redfin, a Seattle, Washington-based real estate giant, forecasts average 30-year fixed mortgage rates will remain in the low 6% range for most of 2026.
“Mortgage rates will continue their slow slide but remain high relative to the pandemic era,” Redfin said last month.
“Lingering inflation risk and the likelihood that we’ll avoid a recession will keep the Fed from cutting more than the markets have already priced in. That’s why rates may dip below 6% occasionally, but not for any meaningful period,” Redfin added.
The Federal Reserve logo is visible on the William McChesney Martin Jr. Building on December 9, 2025 in Washington, DC. (Andrew Harnik/Getty Images)
(WASHINGTON) — The Federal Reserve is set to announce its latest adjustment of interest rates on Wednesday, potentially slashing borrowing costs for the third time this year in an effort to boost sluggish hiring.
Top officials at the Federal Reserve have displayed a rare degree of public disagreement over a possible interest rate cut. Inflation has picked up in recent months alongside the hiring slowdown, posing a risk of an economic double-whammy known as “stagflation.”
The Fed is stuck in a bind, since the central bank must balance a dual mandate to keep inflation under control and maximize employment. To address pressure on both of its goals, the Fed primarily holds a single tool: interest rates.
If the Fed holds interest rates steady as a means of protecting against tariff-induced inflation, it risks a deeper slowdown of the labor market. On the other hand, if the Fed lowers rates to stimulate the economy in the face of a hiring slowdown, it threatens to boost spending and worsen inflation.
“We have one tool,” Fed Chair Jerome Powell said at a press conference in Washington, D.C., in October. “You can’t address both of those at once.”
Lately, sentiment shifted in favor of a rate cut as some influential central bankers voiced openness toward the move, futures markets showed.
The chances of a quarter-point interest rate cut stand at about 87%, surging from a level as low as 30% last month, according to CME FedWatch Tool, a measure of market sentiment.
The prospects appeared to move in response to a murky jobs report and public statements from two allies of Powell on the committee charged with setting rates.
Last month, a jobs report for September sent mixed signals about the labor market. Employers added far more workers than expected in September, though hiring fell short of a breakneck clip. Meanwhile the unemployment rate ticked up to 4.4%, a low figure by historical standards but the highest recorded since October 2021.
New York Fed President John Williams, who is often in lockstep with Powell, days later voiced openness toward a rate cut, telling reporters he still saw “room for a further adjustment in the near term.”
Soon afterward, San Francisco Fed President Mary Daley took a similar position, telling reporters she sees room “for a further adjustment in the near term.” Daley, who isn’t voting on interest rates this year, is widely viewed as a supporter of Powell.
A quarter-point interest rate cut would reduce the Fed’s benchmark rate to a level between 3.5% and 3.75%.
That figure would mark a significant pullback from a peak in 2023. At the outset of the pandemic, interest rates stood at 0%.
Still, a reduction of interest rates could offer some relief for mortgage and credit card borrowers. Savers, however, stand to lose income as interest rates decline for accounts held at banks.
U.S. Federal Reserve Chair Jerome Powell. (Li Yuanqing/Xinhua via Getty Images)
(NEW YORK) — An inflation report on Tuesday is set to provide a key gauge of the nation’s economy, just days after reports of a Department of Justice probe into Federal Reserve Chair Jerome Powell brought fresh scrutiny to the independence of the central bank and its capacity to manage price increases.
Economists expect year-over-year inflation to have been left unchanged at 2.7% in December. Inflation stands at its lowest level since July, but it remains nearly a percentage point higher than the Fed’s target rate of 2%, according to the U.S. Bureau of Labor Statistics.
Prices for some high-profile items like coffee and beef continue to soar.
Coffee prices jumped nearly 19% year-over-year in November, the most recent month for which data is available. Beef prices climbed almost 16% over that span. Egg prices plummeted in November, however, falling 13% compared to the previous year.
The onset of elevated inflation alongside sluggish hiring in recent months had put the Fed in a difficult position, even before the DOJ opened a probe into Powell.
The central bank must balance a dual mandate to keep inflation under control and maximize employment. To address pressure on both of its goals, the Fed primarily holds a single tool: interest rates.
The Fed cut interest rates at three consecutive meetings late last year in an effort to boost the flagging labor market. Still, borrowing costs remain well above a 0% rate established at the outset of the COVID-19 pandemic.
The criminal probe into Powell appears to center on allegations of false testimony he made about cost overruns in a renovation of the Fed’s headquarters during a congressional hearing in June.
Powell, who was appointed by Trump in 2017, issued a rare video message on Sunday night rebuking the investigation as a politically motivated effort to influence the Fed’s interest rate policy.
A bipartisan group of economists and former top Fed officials on Monday issued a joint statement condemning the probe as an attempt to undermine the Fed’s political independence.
The investigation follows months of strident criticism leveled at the Fed by President Donald Trump, who has urged the central bank to significantly reduce interest rates. Trump denied any involvement in the criminal investigation during a brief interview with NBC News on Sunday night.
In a statement to ABC News, a spokesperson for Attorney General Pam Bondi said, “The Attorney General has instructed her U.S. Attorneys to prioritize investigating any abuse of taxpayer dollars.”
A longstanding norm of independence usually insulates the Fed from direct political interference.
In the event a central bank lacks independence, policymakers tend to favor lower interest rates as a means of boosting short-term economic activity, analysts previously told ABC News. But, they added, that posture poses a major risk in the possibility of years-long inflation fueled by a rise in consumer demand, untethered by interest rates.
Stocks closed higher on Monday, shrugging off a dip earlier in the day after reports of the DOJ probe into Powell.
Treasury yields, however, also ticked up on Monday, suggesting possible concern about the Fed’s ability to constrain inflation.
Since bonds pay a given investor a fixed amount each year, the specter of inflation risks devaluing the asset and, in turn, makes bonds less attractive. When bond prices fall due to a drop in demand for Treasuries, bond yields rise.
