Though mortgage rates have fallen from their 8% peaks, the decline has been slow and gradual. Over the past 12 months, the average 30-year fixed mortgage rate has fluctuated between 6.5% and 7.5%. Most housing economists had expected mortgage rates to drop to 6% by the end of 2024, moving into the mid-5% range in 2025.
The short answer is: It's highly unlikely we'll see mortgage rates drop back to 3% anytime soon. However, recent inflation numbers point to cooling of the pace of inflation.
The National Association of Home Builders expects the 30-year mortgage rate to decrease to around 6.5% by the end of 2024 and fall below 6% by the end of 2025, according to the group's latest outlook.
Experts overwhelmingly say that the housing market isn't going to crash anytime soon. The last housing crash helped cause today's lack of supply, which is what's keeping prices from falling. Mortgage rates, however, are expected to ease in 2025. This will help make homeownership more affordable.
A slowing economy could also push mortgage rates lower, but Parangi warns this isn't guaranteed. "A mild recession would push rates down as the Fed tries to stimulate growth," Parangi says. "But it isn't always good for mortgage rates if it brings market instability or more inflation."
10 markets with the biggest drops in home prices
Miami, Florida — 12.4% Cincinnati, Ohio — 9.5% San Francisco, California — 8.9% Kansas City, Missouri — 8.4%
Locking in early can help you get what you were budgeting for from the start. As long as you close before your rate lock expires, any increase in rates won't affect you. The ideal time to lock your mortgage rate is when interest rates are at their lowest, but this is hard to predict — even for the experts.
Despite an overall reduction in borrowing costs over the past two years, the 30-year mortgage rate recently moved up from a little above 6% in September 2024 to closer to 7% in January 2025. That contrasts with longer term mortgage rates holding at historically low levels of between 2% and 3% for much of 2020 and 2021.
Why mortgage rates won't drop to 2% again. Again, when mortgage rates hit record lows early in the pandemic, the federal funds rate was near zero. Barring another major economic shock, the Fed projects that the federal funds rate will only take modest adjustments downward over the next several years.
The current Bank of America, N.A. prime rate is 7.50% (rate effective as of December 19, 2024).
The bottom line. Predicting exactly when mortgage rates will hit 5% is difficult. It could happen by late 2025, but market conditions could speed up or delay this timeline. "Some consumers feel rates will drop in the next two to four months [but] that may never happen," says Rathbun.
Today's rates seem high compared with the recent 2% rates of the pandemic era. But experts say getting below 3% on a 30-year fixed mortgage is unlikely without a severe economic downturn.
Current mortgage interest rates in California. As of Sunday, January 12, 2025, current interest rates in California are 7.33% for a 30-year fixed mortgage and 6.61% for a 15-year fixed mortgage.
Credit card rates will edge off their record highs but remain pricey. By the end of 2025, McBride predicts that the average credit card annual percentage rate (APR) will fall 0.47 percentage point from its year-end 2024 level (20.27%).
There is technically no limit to how many times you can refinance your home. If you meet the lender's qualifications and it makes financial sense for your situation, you can refinance as often as you wish. However, just because you have the option to refinance multiple times doesn't mean it's always a wise choice.
Some economists are forecasting that interest rates will drop further, possibly to 3.25% or 3.5% by the end of the year. However, stubborn inflation could hold back the pace of interest rate cuts. The market is currently pricing in two rate cuts in 2025. Bear in mind that the mortgage rate is just one aspect of a deal.
Fannie Mae's chief economist says, “Long-run interest rates have moved upward over the past couple of months following a string of continued strong economic data and disappointing inflation readings.” They are putting the average 30-year fixed rate at 6.5% in the beginning of 2025, declining to 6.1% in 2026.
What happens if you lock in a mortgage rate and it goes down? If you're locked in and mortgage rates fall, you'll be stuck paying the higher rate unless your rate lock includes a float-down option. A float-down option lets you honor your locked-in rate or the current rate, whichever is lower.
The easiest and most fruitful way for homebuyers and existing homeowners to lower their mortgage rate is to compare rates among lenders, but borrowers can also be opportunistic by taking out a mortgage in January when rates tend to be at seasonal lows.
The Bottom Line. No one likes high interest rates, but they're not the end of the world. This is still a great time to buy a house—you'll just pay more than you would've a few years ago. It's also a good time to sell a house.
That's because in more than half of the 50 largest markets in the U.S., median list prices have decreased year over year—in one case by more than 12%, according to the Realtor.com® September Housing Market Report.
Monthly Payments for a Typical California Home Are Over $5,500. Monthly home payments assume a 30-year mortgage, 10 percent down payment, 1.1 percent property tax rate, 0.38 percent homeowners' insurance rate, and 0.558 percent private mortgage insurance rate.
National house prices have been stabilizing and even trending downward when compared to 2023 figures. As of November this year, Realtor.com reported that year-over-year house prices were down 0.07%, putting the median sale price at $416,880. But the median price per square foot increased by 1.6%.