Mortgage rates have settled into a narrow range as 2025 draws to a close, offering homebuyers significantly better conditions than a year ago. The average 30-year fixed rate stands around 6%, down from 6.72% at this time in 2024. For many borrowers, the return of sub-6% rates on some loan products marks an important milestone.

Current Rate Snapshot

As of December 23-24, 2025:

  • 30-year fixed (purchase): Approximately 5.99-6.21%
  • 15-year fixed (purchase): Approximately 5.38%
  • 30-year fixed (refinance): 6.65%
  • 15-year fixed (refinance): 5.77%

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.21% as of December 18, down slightly from 6.22% the previous week.

Year-Over-Year Improvement

The mortgage landscape has improved considerably from a year ago:

  • December 2024: 30-year rates averaged 6.72%
  • December 2025: Rates around 6.21%—a half-point improvement
  • Purchase applications: Up 10% compared to the same time last year

The improvement largely reflects the Federal Reserve's three rate cuts since September, which helped reshape borrowing costs across the board.

Why Rates Aren't Lower

Despite Fed rate cuts, mortgage rates haven't fallen as much as some borrowers hoped. Several factors explain the disconnect:

Strong economy: Q3 GDP growth of 4.3% reduces urgency for lower rates

Inflation concerns: The Fed remains cautious about declaring victory on inflation

Treasury yields: The 10-year yield, which heavily influences mortgage rates, has held near 4.15%

Quantitative tightening: The Fed's policy of reducing its balance sheet has ended as of December 2025, but the effect on rates takes time to materialize

What It Means for Buyers

For prospective homebuyers, the current environment offers:

Better affordability: A half-point rate improvement on a $400,000 mortgage saves approximately $130/month in payments.

More options: With rates stabilized, buyers can shop with more certainty about financing costs.

Less urgency: Rates aren't expected to spike higher, giving time for thoughtful decisions.

Refinance Considerations

For homeowners considering refinancing:

  • Refinance rates remain higher than purchase rates
  • Those who bought in 2022-2023 at higher rates may benefit from refinancing
  • Consider closing costs against monthly savings to determine break-even point

2026 Outlook

Forecasters expect mortgage rates to remain in the low 6% range through early 2026:

  • Near-term: Rates likely to hover around current levels
  • Gradual decline: Many forecasts predict slow improvement through 2026
  • Volatility possible: Short-term rate increases remain possible

The Fed's cautious approach to additional rate cuts suggests mortgage rates won't fall dramatically in the near term.

Housing Market Context

The rate environment affects broader housing dynamics:

  • Inventory: Still constrained as homeowners with sub-4% mortgages hesitate to sell
  • Prices: Remain elevated in most markets despite affordability challenges
  • New construction: Builders offering rate buydowns to attract buyers

The Bottom Line

Mortgage rates in the low 6% range represent a meaningful improvement from 2024 and offer better conditions for homebuyers. However, those hoping for a return to pandemic-era 3% rates will be disappointed—the "new normal" appears to be rates starting with a 6. For qualified buyers, current conditions offer a window to purchase before any potential rate increases. For those waiting on the sidelines, patience may be rewarded with modest improvement—but dramatic rate drops seem unlikely.