January Mortgage Outlook: New Year, Same Rates

Mortgage rates could fall in January, but they’re more likely to hold steady. While daily ups and downs are a given, a major shift this month feels like a long shot.

October’s government shutdown throttled the flow of data from federal agencies, making it tough to gauge the economy’s health. Neither October nor December’s Federal Reserve 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’s a “probably,” not a “definitely.”

Though the Federal Reserve doesn’t directly set mortgage rates, expectations around the Fed’s decisions often set the tone for markets. Pretend it’s 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’s a needle scratch moment — the music stops and everyone turns to look.

The uncertainty around 2025’s 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 — it’s better than admitting you’re not sure what to do.

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’s 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.)

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, so there are always differences. Usually, though, if you were to plot them on a graph you’d see a relatively tight cluster. Seeing that level of variation implied lenders were having a tough time gauging the markets and the economy overall.

It’s looking like this situation will persist this month, as the Fed’s next move remains in question. Folks hoping to buy or refinance a home would be smart to compare offers from multiple mortgage lenders. 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’re seeing this kind of rate dispersion, the potential savings can really start to stack up.

We’re in a new year, and yet we’re still groping around in a post-shutdown hangover. Federal economic data’s started flowing again, but it’s 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.

For example, markets — and mortgage rates — 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’s quality given that missing month. “The data may be distorted,” Powell said in a Dec. 10 press conference, noting later that “we’re going to have to look at it carefully and with a somewhat skeptical eye.”

If incoming data shows continuity from November to December, with inflation 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’d likely see mortgage rates go down as expectations of a Fed cut rise.

But if December’s 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.

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.