This past week interest rates improved once again, despite the Fed not cutting rates. Let’s discuss what happened and look into the week ahead.

“I’ve gotta take a little time A little time to think things over” – I Want to Know What Love is” by Foreigner.

“We do not need to be in a hurry” – Fed Chair Jerome Powell.

On Wednesday, the Federal Reserve issued their monetary policy statement and held a press conference discussing the state of the economy and the outlook for interest rates. The punchline? Things are pretty good, and there’s no rush to cut rates.

“The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid.” FOMC Statement 1/29/2025.

A few months ago, there was concern that unemployment might be on the rise as the Fed issued statements like “further cooling in the labor market would be unwelcome.” Those concerns appear to have subsided, and that is great news for housing and mortgage as jobs buy homes.

A reminder: Fed rate hikes and cuts have no direct impact on mortgage rates. Since September, the Fed has cut rates by 1.00%, and mortgage rates are up nearly 1.00%. The reason for the sharp climb was partly due to inflation fears, and the Fed might have been fueling it by lowering rates. The Fed’s position of “no rush to cut” signals to the market its mandate to maintain price stability and fight inflation. Long-term rates, like mortgages, embrace this.

Lower Oil = Lower Rates

In another good headline, oil prices reached their lowest point in 2025, which is positive news for interest rates. On January 15th, oil touched $80 per barrel and has continued to slide lower to hovering near $72. This trend is favorable, and if it persists, it could lead to further disinflation or a slower inflation rate in the future.

ECB Cuts Rates

Across the pond, the European Central Bank cut rates and indicated that more are likely coming due to their economy stagnating and inflation continuing to come down. As central banks around the globe cut rates, it places pressure on global rates and eventually leads to other central banks, like the Fed to cut rates. This was another bond friendly development this week.

Economic Growth Surprisingly Slowed in Q4

The Bureau of Economic Analysis (BEA) reported that 4th Quarter GDP came in at just 2.3%, well below the estimates of 2.7% and the previous quarter’s reading of 3.1%. Bonds like bad or weaker economic news, so this was yet another good data point for mortgage rates. Should weakness in the economy continue, the Fed could be forced to change its current “no rush to cut rates” position.

30-yr Mortgage Rates

The 30-year fixed rate mortgage averaged 6.95% as of January 30, 2025, down slightly from the previous week when it averaged 6.96%. A year ago this time it was 6.63%.

10-yr Note 4.50%

The 10-yr Note yield which ebbs and flows with mortgage rates declined nicely from the 2024 highs above 4.80% and is attempting to move beneath 4.50%. If that happens, we should expect mortgage rates to move another leg lower as well.

Bottom Line: The previous two times rates were at these levels, they improved nicely. It has started happening again in response to all the bond-friendly tailwinds this week.

Looking Ahead

Next week is Jobs week. We are going to find out how many companies are hiring, how many people are quitting, how many jobs we created and what our unemployment rate looks like. This big week is on the heels of the Fed saying that unemployment has stabilized at a low level.

Mortgage Market Guide Candlestick Chart

Mortgage bond prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 6.0% coupon, where currently closed loans are being packaged. As prices move higher, rates decline, and vice versa.

If you look at the right side of the chart, you can see how prices have moved nicely higher and at the best levels in over one month, meaning the best rates in over a month.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, January 31, 2025)