Mortgage Refinance Rates Drop to Three-Year Lows as Market Activity Rises

Average 30-year fixed mortgage refinance rates dropped to 6.06% for the week ending January 15, 2026, according to Freddie Mac. This marks the lowest rate in over three years, last seen in September 2022. The decline comes after a wave of policy actions and market expectations about lower rates.

The move follows a directive from President Donald Trump, who called on Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities (MBS). The president highlighted the potential for reduced mortgage rates, lower monthly payments, and increased affordability for home buyers.

Industry analysts remain cautious about the long-term impact of the MBS purchases. While initial data shows a slight downward movement in rates, many believe the effect will be temporary and limited without broader monetary or fiscal support.

Why Did This Happen?

Mortgage rates have been sensitive to expectations about the Federal Reserve's actions. In late 2025, the Fed cut its benchmark rate three times, which contributed to a trend of declining mortgage rates. Additionally, Fannie Mae and Freddie Mac's role in purchasing mortgage bonds historically influences lending conditions and borrowing costs.

The market reacted immediately to the news. On January 9, 2026, the 30-year mortgage rate dipped below 6% for the first time in nearly three years, hitting 5.99%. This drop aligned with past patterns where increased demand for MBS correlates with reduced mortgage rates.

How Did Markets React?

Homebuilder stocks surged in response to the news, indicating increased optimism about the housing market. However, broader affordability issues remain a barrier. Experts noted that while lower rates help reduce monthly payments, many homebuyers still struggle with down payments and overall home prices.

The National Association of Realtors reported that sales of previously owned homes increased for the fourth consecutive month in December 2025. The median existing home price rose to $405,400, up for the 30th month in a row. Despite this, affordability challenges persist as home prices remain significantly higher than pre-pandemic levels.

What Are Analysts Watching Next?

Analysts are closely monitoring how long the current rate environment lasts. While the $200 billion MBS purchase has had an initial positive effect, many believe it may not be sufficient to drive a sustained recovery in the housing market.

The lock-in effect, where homeowners with ultra-low rates refuse to sell, is beginning to wane. More homeowners now have rates above 6%, reducing their incentive to stay put. This shift could lead to increased market activity in the coming months.

Investors and policymakers will also be watching the Federal Reserve's next moves. The Fed has already taken steps to ease monetary policy, but further cuts or additional fiscal measures may be needed to sustain the downward trend in mortgage rates.

Homeowners considering refinancing should weigh the costs. Refinancing typically incurs between 2% and 6% in closing costs, and it makes financial sense only if the new rate is at least 1 percentage point lower than the current one.

The housing market faces a complex mix of factors. While lower mortgage rates offer some relief, broader affordability challenges and inflation expectations may limit the extent of market movement. Experts emphasize that the housing market's recovery will likely be gradual and dependent on a combination of factors beyond just rates.