Changes to Interest Rate Projections
In CBO's last full set of economic projections, which were released in June, the organization estimated that the federal funds rate would rise to a fourth-quarter average of 5.3 percent in 2024 before falling to 3.3 percent by the fourth quarter of 2027.
By 2026, the federal funds rate is expected to fall further to 2.9%. Inflation forecasts have also been adjusted upward. Officials now project headline inflation to reach 2.5% by the end of 2025, compared to September's estimate of 2.1%.
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.
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.
As of January 9, 2025, the average rate for a 30-year fixed mortgage is 6.93%, while the 15-year fixed mortgage averaged 6.14%, according to Freddie Mac.
Last year, the White House projection for bill rates in 2030 was 2.4%. Such a level would be much higher than has been typical since the turn of the century. Three-month bill rates averaged around 1.5% over that period.
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.
Interest Rates—After rising over the past couple years, interest rates are expected to broadly hold steady through 2024. The 91-day Treasury bill rate is expected to average 5.1 percent over 2023 and 2024, before falling to a terminal rate of 2.7 percent in 2031.
"As of January 2025, certificate of deposit (CD) rates have been experiencing a downward trend, influenced by recent Federal Reserve policy decisions. Various projections seem to suggest that rates may go as low as 2.5% by 2026.
NAHB: Rates Will Average 6.36% in 2025 and 5.93% in 2026. 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.
Mortgage points, also called discount points, lower your interest rate for the life of the mortgage. A lender may allow borrowers to purchase as little as a fraction of a point or up to four points. One mortgage point typically costs 1% of your loan and permanently lowers your interest rate by about 0.25%.
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.
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.
Mortgage rates dropped this week after four weeks of increases. Mortgage rates ticked down slightly this week, a tiny boon to buyers eager to make a move with newly listed homes coming to market.
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.
California's median home value stands at $773,239, already among the highest nationwide. With zoning restrictions, limited new construction, and strong demand in cities like San Francisco, Los Angeles, and San Diego, experts anticipate average home values will exceed $1 million by 2030.
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.
Today's national 15-year mortgage rate trends
The national average 15-year fixed refinance interest rate is 6.37%, up compared to last week's rate of 6.33%. Typically, 15-year mortgage rates are lower than rates on the more popular 30-year loans.
To qualify for an FHA loan in California borrowers need to have a minimum mortgage specific credit score of 580. A credit score of 580 can qualify you for a 3.5% down payment.
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.