Why mortgage rates are stuck at 6.2% – and may stay there

For weeks now, mortgage rates have barely budged. They are unlikely to move much in the new year either.

Mortgage rates have been in a remarkably narrow range of 6.2% to 6.3% since mid-September, near year-to-date lows, since mid-September. Those rates have been tempting enough to spark refinancing activity and some gains in home buying in the fall, but still raised enough to keep many ambitious buyers out of the market.

The recent stability at relatively high levels can be explained by the country’s unusual economic moment – the labor market is weak, but inflation remains relatively high – combined with government shutdowns that have made it difficult to parse where those trends are going. Many economic reports that normally influence mortgage rates have been delayed, canceled, or only partially released since the close, giving rates few catalysts to move either way.

“The shutdown made everything a blur,” said Hector Amendola, president of Panorama Mortgage Group in Las Vegas. “I think everybody is on the edge of their seats for the January numbers to see what the trend looks like and where it goes.”

Factors including future Federal Reserve actions, trends in government bond yields, and demand for mortgage-backed securities help determine mortgage rates. But at a fundamental level, mortgage rates are generally low when the labor market is weak and the opposite is true when inflation is low and high.

In recent months, the Federal Reserve has been cutting benchmark interest rates amid signs the labor market is slowing. But at such a time, the inflation target is above 2 percent and the members of the rate setting committee have indicated that they are divided on the future direction of interest rates.

That mixed economic and policy backdrop is part of the reason most economists and industry insiders expect modest fluctuations in rates next year. The Mortgage Bankers Association sees mortgage rates stuck in a narrow range between 6% and 6.5% “over the next few years.” Similarly, economists at Realtor.com and Redfin expect mortgage rates to average 6.3% in 2026 — close to current levels — while the National Association of Realtors and Fannie Mae see a slightly larger decline by the end of next year, to around 6%.

“I don’t think they’re going to go down substantially unless something big happens in the economy,” said Melissa Abramovich, a loan officer at A+ Mortgage Services in Muskego, Wis.

And the Fed ultimately has only an indirect effect on mortgage rates. In most scenarios, including this year, mortgage rates start to fall before the Fed starts cutting interest rates. Over the summer, mortgage rates fell from the high 6% range to the low 6% range, and then the Fed only responded with three rate cuts at its September, October and December meetings.