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.
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.
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%.
Interest rate predictions for the next five years depend on factors like inflation, economic growth, and central bank policies. For the next five years, including 2025, analysts forecast interest rates to further adjust, suggesting a stabilisation of around 3.25-4.25% by the end of 2025.
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.
Likewise, we expect the 10-year Treasury yield to move down to an average of 3.0% in 2027 from its current yield of 3.7%. We expect the 30-year mortgage rate to fall to 4.75% in 2027 from an average of 6.75% in 2024. Inflation forecast.
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.
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.
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.
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.
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.
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.
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.
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%.
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.
Mortgage rates to hold near decade-plus highs, in what could feel like a 'new normal' for the housing market. By the end of 2025, McBride predicts that the average 30-year fixed-rate mortgage will fall 0.54 percentage point from its year-end 2024 level (7.04%).
Projected Interest Rates in the Next Five Years
In 2025, ING predicts a further decline to 3%. The University of Michigan inflation expectations in the U.S. for the five-year outlook were revised slightly higher to 3% in August 2023.
The cash rate is assumed to move broadly in line with expectations derived from surveys of professional economists and financial market pricing. Using this methodology, the cash rate remains around its current level of 4.35 per cent until mid-2024 before declining to around 3¼ per cent by the middle of 2026.
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.
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.
More homes on the market in 2025 may create better opportunities for buyers. Higher inventory means fewer bidding wars, which may keep home prices more stable. Falling mortgage rates could also ease the cost of buying a home, though it may take time.
Housing Market Forecast 2026: Will Prices Rise or Fall
In 2026, the housing market is expected to continue its upward trend, with home prices rising at a moderate pace. The pent-up demand for housing is expected to be supplied between 2025 and 2030, according to the National Association of Home Builders.
Housing Market Predictions for 2027
Goldman Sachs leans towards optimism, anticipating a steady ascent in national home prices over the next four years. Their forecast predicts growth of 3.8% in 2024, rising steadily to 4.9% by 2027.