Current mortgage rate data:

note that luck examined the latest available data for Optimal Blue on January 9th, and the numbers reflect mortgages finalized as of January 8th.

What’s happening with mortgage rates in today’s market?

If it feels like 30-year mortgage rates are stuck around 7% forever, that’s not far from the truth. Many observers had expected rates to soften once the Fed began lowering the federal funds rate in September 2024, but that didn’t happen. There was a brief decline before this meeting, but interest rates have since risen sharply.

In fact, by January 2025, the average interest rate on a 30-year fixed-rate mortgage will exceed 7% for the first time since May of last year, according to Freddie Mac data. This is significantly different from the historic average of 2.65% recorded in January 2021, when the government was still trying to stimulate the economy and prevent a pandemic-induced recession.

Experts agree that unless another catastrophe occurs, we won’t see rates in the 2% to 3% range in our lifetimes. And now, as President Donald Trump pursues policies such as tariffs and deportations, some observers are concerned that the labor market could tighten and inflation could reignite. As a result, American homebuyers are struggling with high mortgage rates, but some have found ways to make their purchases more affordable, such as negotiating lower interest rates with builders when purchasing new homes.

But homebuyers (and homeowners looking to refinance) were finally able to get some peace of mind in late August and early September of 2025. Ahead of the Fed’s September 16-17 meeting, mortgage rates began a marked downward trend on expectations that the central bank would lower the federal funds rate.

The Fed did cut rates as expected, cutting the benchmark interest rate by a quarter of a percentage point. This was the first rate cut in 2025. A second rate cut of the same amount was then implemented at the end of October, followed by a third rate cut in early December.

How to get the best mortgage rate possible

While you can’t control your financial situation, your financial profile as an applicant can have a big impact on the mortgage rate you receive. With this in mind, try to do the following:

• Make sure your credit is in good standing. The minimum credit score to get a conventional mortgage is usually 620 (for FHA loans, you may be able to qualify with a score of 580, or as low as 500 and a 10% down payment). But if you want a low interest rate that could potentially save you five or even six figures in interest over the life of your loan, you’ll need a pretty high score. For example, lender Blue Water Mortgage says a score of 740 or higher is considered top-tier.
• Keep your debt-to-income (DTI) ratio low. DTI can be calculated by dividing your monthly debt payments by your gross monthly income and multiplying by 100. For example, someone with a monthly income of $3,000 and monthly debt payments of $750 would have a DTI of 25%. Generally, a DTI of 36% or lower is best when applying for a mortgage, but you may be approved with a DTI as high as 43%.
• Please undergo preliminary screening with multiple financial institutions. You may want to use a combination of major banks, local credit unions, and online lenders to compare offers. Additionally, connecting with loan officers from several different financial institutions can help you assess what you’re looking for in a lender and which institution best suits your needs. When comparing interest rates, be sure to compare them in the same way. If one quote relies on buying mortgage discount points and another doesn’t, it’s important to realize that there is an upfront cost to buying down the interest rate with points.

Historical graph of mortgage interest rates

Current interest rates seem high because most people remember the ultra-low interest rates of the past 15 years or so. This market was driven by a unique set of historical circumstances. The unprecedented policy followed a long period when the Fed kept its key interest rate at zero as it recovered from the Great Recession, and then as the country battled the global coronavirus pandemic.

With more normal economic conditions now prevailing, experts agree that we are unlikely to see such dramatically low interest rates again. In the long run, a rate of around 7% is not abnormally high.

Consider a graph from the St. Louis Fed that tracks Freddie Mac data with a 30-year fixed-rate mortgage average. In the 1990s, 7% interest rates were more or less the norm. Compared to interest rates in the 1970s and ’80s, a 7% interest rate looks like a bargain. In fact, in September, October, and November of 1981, mortgage interest rates were all above 18%.

The historical context is little consolation for homeowners who want to move but feel trapped by once-in-a-lifetime low interest rates. Situations like this are so common in the current market that pandemic-era low interest rates have become known as the “golden handcuffs” that are holding homeowners back when to move.

Factors that affect mortgage interest rates

The current state of the U.S. economy is the biggest factor influencing mortgage rates. When lenders fear inflation, they raise mortgage rates to protect their long-term profits.

Another major factor is the national debt. If the federal government runs a large deficit and must borrow to make up the difference, that could put upward pressure on interest rates.

Mortgage demand plays an important role. When demand for loans is low, lenders may lower interest rates to attract more borrowers. On the other hand, high demand means lenders may decide to raise interest rates as a way to cover the cost of servicing more loans.

And of course we have to consider the actions of the Federal Reserve. The Fed can influence interest rates on financial products such as mortgages, both through its decisions to raise or lower the federal funds rate and through what actions it takes on its balance sheet.

The federal funds rate receives a lot of media attention because increases and decreases in this benchmark rate (the rate that banks charge each other for borrowing money overnight) often coincide with increases and decreases in interest rates on mortgages and other forms of credit. However, the Fed does not directly set interest rates on mortgages and other credit products, and those rates do not always exactly match the federal funds rate.

Another way the Fed influences mortgage rates is through its balance sheet. During economic crises, central banks purchase financial assets and hold them on their balance sheets, injecting liquidity into the economy. Mortgage-backed securities (MBS) are an important asset type for the Fed in these circumstances.

But until recently, the Fed had been slimming down its balance sheet, allowing assets to mature without purchasing new assets to replace aging ones. This will put upward pressure on mortgage interest rates. The policy, known as quantitative tightening, ended in December 2025.

Why is it important to compare mortgage rates?

Comparing interest rates on different types of loans and considering different financial institutions are both important steps in choosing the best mortgage for your situation.

If your credit is in great shape, choosing a conventional mortgage may be your best choice. However, if your score is below 600, an FHA loan may give you opportunities that you wouldn’t have with a conventional loan.

Shopping with different banks, credit unions, and online lenders can make a noticeable difference in the amount you pay. In markets with high interest rates, homebuyers could save between $600 and $1,200 a year by applying to multiple mortgage lenders, according to Freddie Mac research.