In another historic turn for the housing market, mortgage rates have fallen to their lowest point in more than three years. This decline comes on the heels of Donald Trump’s announcement to buy $200 billion worth of mortgage bonds. This new Homeownership Accelerated Loan program is designed to lower the cost of borrowing for future homeowners. The average 30-year fixed mortgage rate fell to 6.06% for the week ending January 15. That’s a drop from 7.04% in the same week last year.
In December, the typical home sold was an existing home, with a median selling price of $405,400. This figure underscores the persistent housing demand in our markets. Sales of previously owned homes jumped 5.1% from November down to December. This increase is a strong indicator of a long needed rebound in housing activity that has been missing these last several years.
So it’s no surprise that Trump’s recent proposition to invest $10 billion into mortgage bonds is helping to fuel the downward trend we’re seeing in mortgage rates today. He stated, “This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable.” And his advocacy dovetails seamlessly with today’s favorable market conditions. Even homeowners who were unwilling to sell a year ago because they’d have to give up their ultralow pandemic mortgage rates are reconsidering.
Susan Wachter, a housing expert, commented on the evolving landscape, saying, “It has started; we can already see it in the data.” She admits that Trump’s proposed infrastructure bonds have not reached $200 billion. As cheerful as she might be about other economic indicators, Davidson says housing is just now gaining enough momentum to look forward to a clearly strong spring sales season.
That recent decline in mortgage rates is especially helpful for buyers. To illustrate, if a homebuyer buys a $450,000 home and puts down 20%, they’re going to feel the monthly payments. Based on last year’s average interest rate, the resulting principal and interest payments would be approximately $2,405. With the new average rate now at 6.06%, those payments would fall to about $2,172. Thanks to this change, you may end up saving an additional $230 each month!
Sam Khater, a leading economist, highlighted the benefits of these changes. “The impacts are noticeable, as weekly purchase applications and refinance activity have jumped, underscoring the benefits for both buyers and current owners.”
Even with the good news, there’s reason for caution from some industry experts, who warn that the high-mortgage-rate hangover isn’t quite over. As Daryl Fairweather from Zillow noted, the majority of people report being “locked in” by their existing home. This fear of losing favorable, hard-won mortgage terms is leading them to postpone major life decisions such as career changes or starting families.
Additionally, only 19% of homeowners have mortgage rates exceeding 6%. At the same time, the share of Americans benefiting from ultra-low rates under 3% has plummeted. Combined, these changes create a strong incentive for homeowners to move. In turn, it would help jumpstart the housing recovery.