In our 2025 mortgage forecast, experts outlined a rough range between 5% and 7% for the average 30-year fixed mortgage. Most housing market forecasts predict rates landing around 6.4% at the end of the year.
Lawrence Yun, chief economist at the National Association of Realtors, even told CNBC in 2023 that he doesn't think mortgage rates will reach the 3% range again in his lifetime.
The National Association of Home Builders is forecasting 6.12% in 2025 and 5.71% in 2026. The National Association of Realtors (NAR) is predicting 5.9% in 2025 and 6.1% in 2026. And, finally, realtor.com is saying only that in 2025 the range will be between 6.2% and 6.3%.
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.
and then projects that mortgage interest rates – in particular the 30-year fixed rate, which is closely tied to the federal funds rate and the 10-year Treasury note yield – will remain elevated, and only decline 0.2 percent from 6.5 percent in 2025 to 5.9 percent in 2027.
Projected Interest Rates in the Next Five Years
ING's interest rate predictions indicate that in 2024, rates will start at 4%, with subsequent cuts to 3.75% in the second quarter, 3.5% in the third, and 3.25% in the final quarter. In 2025, ING predicts a further decline to 3%.
Market Experts are Divided on Rate Cuts
It predicts five rate cuts in February, March, May, August, and November, resulting in a base rate of around 3.5%. Bank of America also sees the “terminal rate” of 3.5% by early 2026, which implies five rate cuts from the current level.
Key takeaways. The Federal Reserve is expected to lower rates by at least 100 basis points through the end of 2024. As such, primary mortgage rates could fall by as much as 60 bps over the next year — and by even more if the rates market begins to price in more cuts than are currently expected.
When will house prices go down? While it's a bummer of an answer, experts say it's unlikely consumers will see house prices drop meaningfully during 2024. Home prices will drop when a mixture of economic factors favorably collide — primarily lower interest rates and increased housing supply.
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.
Mortgage rates have tended to fall in response to recent recessions.
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.
Falling interest rates expected to drive recovery in the second half of 2025, says CIBC's chief economist.
The current Bank of America, N.A. prime rate is 7.50% (rate effective as of December 19, 2024).
At its February 2024 meeting, the Reserve Bank Board decided to leave the cash rate target unchanged at 4.35 per cent. This decision supports progress of inflation to the midpoint of the 2–3 per cent target range within a reasonable timeframe and continued moderate growth in employment.
Current Forecasts and Expert Opinions
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.
Fannie Mae: Rates Will Average 6.4% in 2025 and 6.1% in 2026. The December Housing Forecast from Fannie Mae puts the average 30-year fixed rate at 6.6% in the beginning of 2025, declining to 6.1% in the first quarter of 2026.
"While I'd love to say rates will drop below 6% in 2025, I think it's a moderate probability and not a certainty," says Steven Parangi, a licensed mortgage loan originator and owner of Alpine Mortgage Services.
3.4% expected in September. That implies two more 25 basis point cuts from where rates are today. In 2026, the FOMC expects to cut by another 50 bps, to 3.4%.
Oxford Economics is predicitng that base rate will eventually fall to 2.5 per cent in 2027 where it will broadly remain throughout 2028 and 2029.
Mortgage rates are expected to go down in 2025, but they'll probably remain elevated in the near term. Mortgage rates started ticking up from historic lows in the second half of 2021 and increased dramatically in 2022 and throughout most of 2023.
Fannie Mae expects rates to average 6.4% for the year. Wells Fargo projects a slight decline, with rates averaging around 6.3% by the end of the year. Goldman Sachs predicts rates will remain above 6% through 2025.
The length of your mortgage term affects the balance between stability and flexibility. A 5-year fixed term provides long-term protection from rate fluctuations, offering stability throughout the term.
Getting back to 5% home loan rates will take time, experts say. "I agree with the most recent MBA forecast, expecting rates to reach 5% in the second half of 2025," says David Druey, Florida regional president of Centennial Bank. However, this is mere speculation — and several factors could change this timeline.