Will mortgage rates fall ahead of January's Fed meeting?

Core Viewpoint - The Federal Reserve is expected to maintain current interest rates, while mortgage rates are influenced by President Trump's housing affordability initiatives rather than Fed actions [1][2]. Mortgage Rates and Applications - Mortgage rates have recently declined, leading to a significant increase in refinance applications, which reached the highest level since September 2025, with a 14% increase in loan applications and a 20% rise in refinancing from the previous week [3]. - The 30-year fixed-rate loans saw a slight increase of three basis points from a three-year low of 6.06% [4]. Impact of Trump's Initiatives - Since the announcement of housing affordability initiatives on January 7, 30-year mortgage rates dropped from 6.16% to 6.06%, before slightly rebounding to 6.09% [5]. - Some lenders are now offering mortgage rates below 6%, indicating a competitive lending environment [5]. Future Fed Rate Expectations - The Federal Reserve is anticipated to make one or two interest rate cuts in 2026, although there are uncertainties regarding the labor market and inflation trends [6]. - J.P. Morgan predicts a potential rate hike in the third quarter of 2027, influenced by expected inflation declines and a tightening labor market [7]. Presidential Actions on Housing - President Trump has implemented several measures aimed at increasing housing affordability, including a ban on institutional investment in single-family housing and a directive for Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds [8]. - An initiative was also proposed to allow 401(k) participants to use retirement savings for home down payments, although details remain vague [8]. Market Reactions and Predictions - With the Fed's current stance, mortgage rates are expected to fluctuate, and there may not be sustainable downward movements in the short term [9]. - Economists are monitoring 10-year Treasury yields, which are settling in the 4.2% to 4.3% range, as these will impact mortgage rates [9][10].