His view aligns with the Mortgage Bankers Association's prediction that rates will stay between 6% and 7% throughout the year. Before you make any homebuying decisions, let's look at what might drive rates down toward that 6% threshold – and what could keep them at current levels or even push them higher.
The Mortgage Bankers Association predicts in its Mortgage Finance Forecast that mortgage rates will gradually slide from 6.6% at the beginning of 2025 to 6.3% throughout 2026.
Most housing economists had expected mortgage rates to drop to 6% by the end of 2024, moving into the mid-5% range in 2025.
Current Forecasts and Expert Opinions
The short answer is: It's highly unlikely we'll see mortgage rates drop back to 3% anytime soon.
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.
The lowest average mortgage rates on record came about when the Federal Reserve lowered the federal funds rate in 2020 and 2021 in response to the pandemic. As a result, the weekly average 30-year, fixed-rate mortgage fell to 2.65%, while the average 15-year, fixed-rate mortgage sunk to 2.10%.
Based on current conditions, mortgage rates may continue to trend down for the next year or two before settling in at a more steady rate in the following years. How low rates will go depends on the economy. It's possible in a few years we could see rates drop into the 5% range.
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.
The 30-year mortgage averaged 6.68% in 2024, down from 6.91% in 2023.
We forecast existing home sales to total 4.25 million in 2025, an improvement of 4.8 percent compared to our expected 2024 sales pace of 4.06 million, but still down 20.3 percent compared to 2019.
Average personal loan rates started at 11.93% in 2024. Rates were relatively unchanged for most of 2024, ending the year at 12.29%. Personal loan rates may be headed lower in 2025, but you'll need good credit to snag the best rates.
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.
Falling interest rates expected to drive recovery in the second half of 2025, says CIBC's chief economist.
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.
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%.
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.
The National Association of Realtors preditcs mortgage rates will be around 6% in 2025. Meanwhile, Redfin predicts mortgage rates will remain in the high-6% range throughout 2025, with the weekly average rate fluctuating throughout the year but averaging around 6.8%.
The HousingWire forecast for mortgage rates in 2025 is a range between 5.75% and 7.25%. Some observers scoff at the wide 150 basis point range in our expectations for the year, as though it's a cop-out. But our take is that the market is starting high and there's a real risk of negative news that pushes rates above 7%.
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.
If you have a fixed-rate mortgage, your mortgage payments will not drop over time. However, the amounts that comprise your loan do change over time due to your amortization schedule — the schedule of your payments. This schedule impacts how interest payments and principal payments are distributed.
2021: The lowest 30-year mortgage rates ever
Rates plummeted in 2020 and 2021 in response to the Coronavirus pandemic. By July 2020, the 30-year fixed rate fell below 3% for the first time. And it kept falling to a new record low of just 2.65% in January 2021. The average mortgage rate for that year was 2.96%.
January is the most wonderful mortgage time of the year
For borrowers looking to get the best rates, January offers the most competitive pricing with lenders offering a nearly 20 bps discount compared to the rates offered in June through October.