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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.
McBride expects another three interest rate cuts in 2025, which will bring the benchmark rate down to a range of 3.5% to 3.75%. That benchmark rate influences interest rates consumers are more familiar with, such as credit card interest rates and car loans.
In December 2024, 30-year mortgage rates averaged around 6.42%, according to Zillow data. Average 15-year mortgage rates were 5.82%.
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%.
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.
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.
Which bank gives the highest interest rate on FD? As of 2024, Canara Bank offers the highest interest rate of 7.25% for 444 days.
The Mortgage Bankers Association (MBA) in its 2025 finance forecast indicates that mortgage rates will gradually slide from 6.6% at the beginning of 2025 to 6.3% through 2026. The National Association of Home Builders is forecasting 6.12% in 2025 and 5.71% in 2026.
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.
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.
"As we look ahead into 2025, lower CD interest rates are a possibility," says Ben Alvarado, executive vice president at California Bank and Trust. After all, the Federal Reserve lowered its benchmark rate three times in 2024, and many analysts expect there to be at least two more Fed rate cuts in 2025.
The fed funds target rate is now set at 4.25% to 4.50%. The Fed held rates at 5.25% to 5.50% from July 2023 to September 2024. Between March 2022 and July 2023, the Fed raised rates eleven times, from near 0%. Source: U.S. Federal Reserve, December 18, 2024.
The first move up to 0.25 per cent came in December 2021 and a sharp series of rises from the MPC followed, driving base rate all the way up to 5.25 per cent in August 2023. Rates were then held at 5.25 per cent until August 2024, when they were cut to 5 per cent. The next cut was to 4.75 per cent in November 2024.
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.
For only the third time in 2024, the Federal Reserve has lowered the federal funds rate. On Dec. 18, the Fed cut the rate, which influences interest on everything from car loans to credit cards, by 25 basis points. That takes it from 4.50% to 4.75% to 4.25% to 4.50%, the lowest it's been since February 2023.
As a result, we expect the Bank to cut interest rates from 4.75% now to 3.50% in early 2026, further than the low of 4.00% that investors currently expect.
Mortgage rates unlikely to drop below 4% in 2024
'Economists currently expect base rates to fall to 3.5% by the end of 2025, which would imply mortgage rates remaining in and around the 4%+ range. '
The National Association of Realtors: NAR's quarterly outlook has 30-year mortgage rates ending 2024 at 6.1% and bottoming out around 5.8% toward the end of 2025. After that, we could see rates tick back up to 6.1% in 2026.
FHA Mortgage Rate Predictions for 2024
Business Insider repeats the Fannie Mae prediction for 2024 that rates may reside between 6.4% and 7.1% for 30-year fixed-rate conventional mortgages.
According to economic projections released after the meeting, officials expect to cut rates just twice in 2025 — down from four times in their earlier projections — and the minutes show that even those cuts are not guaranteed.