As we step into the new year, with the presidential inauguration on the horizon, many are wondering about the direction of interest rates.

What’s often forgotten is that low mortgage rates frequently parallel higher joblessness. Remember, you need a solid paycheck to buy a home. US unemployment averaged 6.4% in the years when mortgage rates fell, but it averaged 5.5% when mortgages became more expensive.

January is dominated by a change in presidential administrations, which dials up the uncertainty. "When things are more uncertain, rates tend to be more volatile," says Chen Zhao, head of economic research for real estate brokerage Redfin.

The Federal Reserve has been cutting its benchmark rate in response to falling inflation, but stubbornly high prices for housing, energy, and food remain problematic. As a result, the Fed has scaled back its expectations on rate cuts for this year.

There aren't likely to be any dramatic dips in mortgage rates in the near future. New year, new housing market? Not exactly. In early 2025, affordability remains a major challenge for prospective homebuyers,