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Fed holds steady, but mortgage rates dip to three-year low

In yet another reminder that the Federal Reserve doesn’t control mortgage rates, the central bank kept its federal funds rate in place at its January meeting, an announcement that surprised no one. And yet mortgage rates fell. The average 30-year loan costs 6.18% this week, down from 6.25% last week and matching the lowest level since 2022, according to Bankrate's weekly survey of lenders.

Meanwhile, the consensus among housing economists at the Mortgage Bankers Association (MBA), Fannie Mae and elsewhere is that 30-year mortgage rates will hold above 6% for the rest of the year.

“MBA’s forecast has been for mortgage rates to remain in a relatively narrow trading range for the foreseeable future, likely remaining between 6% and 6.5% for 30-year conforming loans," says Michael Fratantoni, the group’s chief economist. "The news from this meeting does not change our forecast for mortgage rates. We expect that this level of rates will help support a somewhat stronger spring housing market than last year, but not a break-out year.”

A spike in home sales is likely only if rates drop below 6%, says Bill Banfield, chief business officer at Rocket Mortgage.

"When rates fall below 5.99%, Rocket typically sees demand rise by about 30%," he says. "This isn’t a coincidence. This is clear evidence that rates starting with a five flip a psychological switch. Over the last few years, that’s the range where buyers and refinancers stop waiting on the sidelines and start taking action."

As for the next Fed cut, it’s unclear when that might come. While the job market has slowed, inflation remains above the central bank’s 2% target. “Until there is further economic data to support another rate cut, they will keep the [federal] funds rate as is,” says Melissa Cohn of William Raveis Mortgage.

Learn more: Weekly mortgage rate trend predictions

The rates you see advertised here might not match the rate you're offered due to factors like your credit score, down payment and more. Still, getting the best rate can make a big difference in your monthly budget, and potentially save you thousands of dollars in interest over the life of the loan. It’s been proven: Shopping with multiple lenders can save you up to $1,200 a year.

Follow these steps when comparing mortgage rates:

• Ensure you’re comparing apples to apples. If one rate seems significantly higher or lower than another, make sure it’s for the same type of product — for example, a 30-year, conventional loan — and that you’re comparing an interest rate to an interest rate or an annual percentage rate (APR) to an annual percentage rate.
• Look at APR and mortgage rate. Your mortgage rate is one cost of borrowing money, but your APR includes that as well as other fees associated with your loan, making it a more complete picture of the actual cost. Some lenders charge lower rates but higher fees on mortgages.
• Get quotes from different types of lenders. You may find different costs from a local bank or credit union compared with a national bank or an online lender. 

Factors that determine your mortgage rate

Your mortgage rate depends on a number of factors, including your individual credit profile and what’s happening in the broader economy. These variables include:

• Your credit and finances: The better your credit score and higher your income compared to your debt, the better the interest rate you’ll get. Borrowers with scores of 740 or above tend to qualify for the best rates.
• Loan size and type: The size of your loan, down payment and the type of loan all affect your mortgage rate. Smaller loans with higher down payments represent less risk for the lender, so they tend to get better rates. Certain types of loans which are perceived as less risky — for example, a loan for a single-family home that will be used as a primary residence — also qualify for lower rates. 
• Location: Rates vary based on where the property is located.
• Whether you’re a first-time homebuyer: Many first-time homebuyer loan programs offer lower-rate mortgages.
• Economic factors: Broadly, mortgage rates are impacted by forces like the Federal Reserve, inflation and investor appetite.
• The lender you work with: Lenders set rates based on many factors, including their own supply and demand.
• Mortgage points: Also known as discount points, these additional fees reduce your interest rate. Decide whether they're worth it with our guide to mortgage points.

How does the Federal Reserve affect mortgage rates?

Like any other financial product, mortgage costs may fluctuate with economic events, including Federal Reserve decisions. The central bank doesn’t set mortgage rates, but its policies set the tone for what banks and other lenders charge for loans. If the Federal Reserve lowers its benchmark rate, the rates on other types of loans often — but not always — follow suit. The reverse is true, too. When the Fed raises the rate — as it did after the pandemic — mortgage rates tend to increase. 

However, mortgage rates are more closely tied to other measures, like the yield on 10-year Treasury notes. So it’s not unusual to see mortgage rates move in the opposite direction as the Fed, either, especially in small increments and over short periods of time. 

The Federal Reserve capped off 2025 with three consecutive quarter-point cuts to its benchmark rate. Bankrate experts expect further cuts in 2026, which could — eventually — move mortgage rates lower. 

How to refinance your current mortgage

Before you start applying for a mortgage, here are some mortgage resources to prepare you for the process: