•
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.
Some economists are projecting three rate cuts this year, including Goldman Sachs, whose economists expect rates to end 2025 in the range of 3.5% to 3.75%, down from its current range of 4.25% to 4.5%.
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.
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.
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.
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.
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%.
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.
UK interest rates will fall “four times” or more in 2025 -- to at least 3.75% by the end of the year. A majority of economists made this two-fold forecast before UK long-term borrowing yesterday crept up to its highest level since 1998.
These futures can also be short-term or long-term. Short-term interest rate futures have an underlying instrument with a maturity of less than one year, while long-term interest rate futures have an underlying instrument with a maturity of over one year.
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.
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.
After 14 months of stagnancy, the Federal Open Market Committee (FOMC) lowered the federal funds rate three times in 2024, ending the year with a target range of 4.25% to 4.50%, the lowest since February 2023.
The market forecast is that rates will fall to 3.75 per cent by the end of 2025, and then settle at around that level and become the new normal. However, Oxford Economics believes the downward momentum will continue through 2026 and 2027, with rates settling at around 2.5 per cent.
These lower borrowing costs, combined with the massive amounts of stimulus that were pumped into the economy during the pandemic, are what led to massive inflation and mortgage rates nearly tripling from their record lows. Long story short, we probably won't see mortgage rates go back to 3%.
After hitting record-low territory in 2020 and 2021, mortgage rates climbed to a 23-year high in 2023 before descending somewhat in 2024. Many experts and industry authorities believe they will follow a downward trajectory into 2025. Whatever happens, interest rates are still below historical averages.
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. But mortgage rates recently jumped back up toward 7%.
Interest Rate in the United States is expected to be 4.50 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. In the long-term, the United States Fed Funds Interest Rate is projected to trend around 3.50 percent in 2026, according to our econometric models.