The average rate on a 30-year fixed mortgage in the U.S. fell again this week, just in time for Christmas. But Americans don’t appear to want to buy a home for the holidays, despite the more attractive rates. Mortgage applications are at their lowest level in three months, according to the latest data from the Mortgage Bankers Association.
Currently, the average rate for a 30-year fixed mortgage is 6.18%, down from 6.21% last week. A year ago on Christmas week, rates averaged 6.85%, according to Freddie Mac.
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It wasn’t the same trajectory for a 15-year mortgage, however. The average rate for the shorter loan term rose to 5.50% from 5.47%. This time last year, the average rate was 6%.
Economists predict that the average rate for a 30-year mortgage will remain slightly above 6% next year.
How are mortgage rates determined?
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Since 2020, the median home sales price in the U.S. has risen nearly 25%, or about $82,000.
Several factors impact mortgage rates, including the Federal Reserve’s interest rate decisions and investors’ outlooks on the economy and inflation.
After holding steady much of the year, the Fed cut rates three times to close out 2025. But mortgage rates haven’t moved much since the first of three cuts in September.
While the Fed does set the overnight lending rate banks use to borrow money, it does not set mortgage rates, which hold a much longer term. To better predict the direction of mortgage rates, it’s best to look at the 10-year Treasury yield, which lenders use to set home loan pricing.
At noon on Wednesday, the 10-year yield was at 4.15%. This was an increase from last week’s rate of 4.12%.
How is the housing market?
The average interest rate for a 30-year mortgage has held steady since the end of October, when it dropped to its lowest level in more than a year. After briefly touching 7% in January, rates began a more precipitous decline in July ahead of the series of Fed rate cuts in September, October and earlier this month.
While the drop has yet to entice more buyers into the market, those braving the real estate world are seeing more favorable metrics than they did a year ago. Home listings are up, and sellers are increasingly lowering their initial asking prices as homes take longer to sell.
Despite a buyer-leaning market, affordability remains a challenge for most home buyers. This is especially true for first-time buyers who don’t have equity from a previous home. As Americans feel more uncertain about the economy, home purchase cancellations are rising, according to data from Redfin.
