By Naveen Athrappully
Mortgage rates are continuing the downward trend that began last month but remain high enough to trouble prospective buyers.
The average weekly rate for a 30-year fixed-rate mortgage hit 6.87 percent for the week ending Feb. 12, the fourth consecutive weekly decline, according to data from Freddie Mac. The rate reached “its lowest level thus far in 2025,” said Sam Khater, chief economist at Freddie Mac.
“Recent mortgage rate stability is benefitting potential buyers, as purchase demand is stronger than this time last year. This is an indication that a thaw in buyer activity could be on the horizon,” Khater said.
Despite the four weeks of decline, the 30-year rate is still close to 7 percent, continuing pressure on prospective homebuyers. Roughly four years ago, rates were below 3 percent.
Lisa Sturtevant, chief economist at real estate data company Bright MLS, advises buyers not to attempt to “time” their home purchase so as to get the lowest possible rates, according to a Feb. 13 commentary.
“Rather, buyers should be sure they have their finances in order as they begin their home search. In addition, buyers should shop around for a mortgage to find the rate and terms that are best for them,” she said.
“Mortgage rates could be volatile in the weeks ahead, which could set us up for an unpredictable spring housing market. There is significant pent-up demand in the market. However, potential headwinds include rising inflation and economic uncertainty.”
According to data from the U.S. Bureau of Labor Statistics, 12-month inflation came in at 3 percent in January, up from December. It was the fourth straight month of increase.
Prior to January, inflation had remained below 3 percent for every month since July 2024. The January inflation also beat market expectations.
Sturtevant said the hotter-than-expected inflation “suggests that Fed rate cuts will be delayed, potentially until the summer. Prospective buyers and sellers should expect mortgage rates to remain in the high-6 percent range heading into the spring market.”
A recent survey by Fannie Mae showed that the net share of consumers who believe mortgage rates are set to decline over the coming 12 months fell by 13 percentage points in January. This decline followed a surge in optimism about mortgage rates in the second half of last year.
Kim Betancourt, vice president of multifamily economics and strategic research at the company, said the lower mortgage rate optimism was “largely expected” given that rates have remained stubbornly elevated.
Mortgage Rate Issue
Elevated mortgage rates have created a “lock-in” effect wherein homeowners who bought their properties when the rates were low are unwilling to sell them. Selling properties now would mean owners may be forced to buy properties at higher mortgage rates.
However, the lock-in effect is beginning to ease off as major life events such as divorce or a job change force many homeowners to sell off their properties irrespective of how low the mortgage was on the house, according to a recent report from real estate brokerage Redfin.
“The rate-lock effect is letting up a bit here in Seattle,” said local Redfin Premier real estate agent David Palmer. “Homeowners hate to give up their 2–3 percent mortgage rate, but life happens and people have to move.”
Other reasons are also at play for the easing of the lock-in effect. For one, many Americans are now beginning to believe that mortgage rates are not going to fall back to the lows hit during the pandemic.
Secondly, since home values have surged since the pandemic period, many homeowners now have high enough equity to sell their properties and buy a new one, even at a higher interest rate. This is especially true if the owners are looking to move to an affordable location or are downsizing.
A key factor that determines the movements of the mortgage rate is the U.S. Federal Reserve’s benchmark interest rate. The Fed has cut interest rates down to a range of 4.25–4.5 percent over the past several months.
While investors expect more cuts, the Fed said in December that fewer rate reductions are on the agenda this year, citing issues with inflation.
Speaking before the Senate Banking Committee recently, Fed Chair Jerome Powell reiterated this outlook.
“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” he said.
On Feb. 12, President Donald Trump called for bringing down interest rates, saying this was “something which would go hand in hand with upcoming Tariffs.”
![Strong labor data and positive expectations about the incoming Trump administration pushed the U.S. dollar to a two-year high on Thursday. The U.S. dollar iIndex hit a high of 109.53 on Jan. 2, the first trading day of the year, and the highest since November 2022. The jump came as data released on Thursday by the U.S. Department of Labor showed that initial jobless claims hit an eight-month low, suggesting a robust labor market, which is a positive sign for the overall economy. The dollar index was trading slightly lower on Friday at 108.96 as of 08:30 a.m. EST. The dollar index increase is also supported by investor confidence in the upcoming Trump administration, which assumes power this month. According to a recent survey by consulting company Teneo, “global CEOs and investors are optimistic about the economic impact of a second Trump administration, outweighing concerns about tariffs, geopolitical tensions, and trade barriers.” Story continues below advertisement In fact, “50 percent of global CEOs are accelerating activities in areas such as domestic and international investment and hiring based on the outcome of the 2024 U.S. election,” it said. While the dollar strengthened, the euro and sterling declined on Thursday. The euro fell to its lowest level in more than two years while the sterling declined to its lowest in eight months. A Dec. 17 report from JP Morgan predicts the U.S. dollar to reach even new highs over the coming months. Related Stories How Major US Stock Indexes Fared Jan. 2 1/2/2025 How Major US Stock Indexes Fared Jan. 2 Americans Have Hopes Trump Will Deliver on Immigration, Economy, Safety: Gallup 1/2/2025 Americans Have Hopes Trump Will Deliver on Immigration, Economy, Safety: Gallup “November’s election outcome has given way to lower global growth expectations, wider growth gaps between the U.S. and the rest of the world, and higher terminal federal funds rate forecasts for 2025—the perfect trifecta of bullish U.S. dollar cyclical impulse,” said Meera Chandan, co-head of Global FX Strategy at the company. “These are early first-order reactions that may give way to deeper rethinks once the full set of Trump administration policies are known next year [2025], but for now, they constitute a solid economic rationale for carrying a long U.S. dollar stance into the first quarter of 2025.” JP Morgan sees the euro’s outlook as bearish, noting the eurozone is especially vulnerable to trade conflicts. And while sterling was the best-performing currency against the dollar last year, such an outperformance is not expected this year, it said. US Economy Performance in 2025 With President-elect Donald Trump set to take power in less than three weeks, there are mixed views about how things could shape up for the American economy. According to a Dec. 9 post by Morgan Stanley, markets are “bullish on Trump’s second term, hoping for tax cuts and better growth.” “We expect no net stimulus and a decent size hit from tariffs and immigration. This should be bullish for bonds as the Fed continues cutting, but could be a disappointment for frothy stocks,” it said. Regarding tariffs, the most likely outcome is a 20 percent hike on Chinese imports and on vehicles from Mexico and the European Union, Morgan Stanley said. Story continues below advertisement It predicts the U.S. Federal Reserve to continue cutting interest rates to a range of 3 percent 3.5 percent by the end of 2025. S&P Global is forecasting the U.S. economy to grow by 2 percent in 2025 and 2026, following an estimated growth of 2.7 percent last year. The company sees inflation to likely remain above the 2 percent level for “longer than we previously thought.” Goldman Sachs predicts the U.S. economy to “beat expectations” this year. “The U.S. economy is in a good place,” said David Mericle, an economist with the company. “Recession fears have diminished, inflation is trending back toward 2 percent, and the labor market has rebalanced but remains strong.” While Trump’s policy changes are likely to be “significant,” Mericle does not see these actions changing the trajectory of the economy substantially. Goldman foresees the Fed reducing interest rates to a range of 3.25–3.50 percent, with the U.S. GDP predicted to grow by 2.5 percent. There have been three consecutive quarters of economic growth in the first nine months of 2024—1.6 percent in the first quarter, 3 percent in the second, and 3.1 percent in the third.](https://www.usnn.news/wp-content/uploads/2025/01/US-Dollar-Index-Hits-Highest-Level-in-2-Years-Euro-Falls-150x150.jpg "US Dollar Index Hits Highest Level in 2 Years, Euro Falls | USNN World News")
