Mortgage rates drop as Trump holds off on tariffs in first days in office

Mortgage rates dropped for the first time in six weeks, sliding back below 7% as bond traders grew less jittery about President Donald Trump’s economic agenda.

The average 30-year fixed-rate mortgage rate was 6.96% through Wednesday, down from 7.04% a week earlier, according to Freddie Mac data. The average 15-year mortgage rate was 6.16%, declining from 6.27%.

“While affordability challenges remain, this is welcome news for potential homebuyers, as reflected in a corresponding uptick in purchase applications,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

Applications for new home purchases rose 1% through Friday compared to a week earlier, though refinancing applications fell 3%, according to the Mortgage Bankers Association.

MBA’s chief economist Mike Fratantoni said in a statement that rates around 7% are “a key psychological level, which likely continues to slow the pace of activity for both refinances and purchases.”

Read more: Mortgage and refinance rates today, January 23, 2025: Rates finally decrease — but will they jump back up again?

The slight rate drop comes after Trump signed a slew of executive orders in his first days in office, but held off on slapping steep tariffs on goods imported from China, Mexico, and Canada. Ten-year Treasury yields, which closely track mortgage rates, fell as financial markets grew less worried that the president’s policies would worsen inflation.

Still, mortgage rates remain near the highest level since mid-2024, and tariffs are still likely to come. In a new forecast released on Wednesday, Fannie Mae sees mortgage rates staying relatively elevated and ending the year at 6.5%, up from 6.2%.

Read more: 2025 housing market — is this a good time to buy a house?

Ultimately, those higher rates are likely to keep existing home sales at or near a 30-year low for a third straight year, said Mark Palim, senior vice president and chief economist at Fannie Mae. Buyers are facing ongoing affordability challenges, and many would-be sellers are still opting to hold on to low mortgage rates instead of listing their homes — a phenomenon known as the “lock-in effect” — keeping market activity limited.

“The lock-in effect is likely to be a little more persistent than we had previously thought,” Palim told Yahoo Finance.

Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.

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