Mortgage Rates Drop to Lowest Since Mid-December, but Demand Still Falls Short

Mortgage rates have been on a downward trajectory since the beginning of the year, with the 30-year fixed-rate mortgage dropping to its lowest level since mid-December. According to data from the Zillow Mortgage API, the average 30-year fixed-rate mortgage rate fell to 6.83% on Jan. 31, 2025, a decline of 3 basis points from the previous day. This marks the fourth consecutive day of declines for the flagship average, which has now fallen by a total of 15 basis points over the four-day period. The 15-year fixed-rate mortgage average also dipped, falling 4 basis points to 5.97% on Jan. 31, 2025.

Despite the recent decline in mortgage rates, demand for new purchase mortgages has not kept pace. On Jan. 11, 2025, the average 30-year new purchase mortgage rate was 6.81%, just above the seven-week low of 6.79% reached on Jan. 6, 2025. However, this rate is still significantly higher than the two-year low of 5.89% reached in September 2024. The lack of demand for new purchase mortgages can be attributed to several factors, including low inventory levels, high home prices, and economic uncertainty.



The housing market has been grappling with a persistent shortage of inventory, which has driven up home prices and made it more difficult for potential buyers to find suitable properties. According to the National Association of Realtors, the median existing-home sales price was $450,000 in December 2024, up 3.8% from the previous year. This increase in home prices, coupled with the recent decline in mortgage rates, has not been enough to stimulate demand for new purchase mortgages.

Economic uncertainty, particularly surrounding the COVID-19 pandemic and its impact on the labor market, has also contributed to the shortfall in mortgage demand. Many potential buyers may be hesitant to take on a long-term financial commitment, such as a mortgage, due to concerns about job security and income stability.



In conclusion, the recent decline in mortgage rates has not been enough to stimulate demand for new purchase mortgages. The combination of low inventory levels, high home prices, and economic uncertainty has created a challenging environment for potential buyers. As the housing market continues to evolve, it will be important to monitor these factors and their impact on mortgage demand.