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.
The central bank is now penciling in only two rate cuts in 2025, down from the four it had forecast in September. 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%.
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%.
Ahead of President-elect Donald Trump's second term, however, the outlook is far less certain. The 30-year fixed mortgage rate is now expected to stay elevated between 6% and 6.5% for the next two years. Just two months ago, economists thought it would fall to the 5% range by the second half of 2025.
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.
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%.
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.
The length of your mortgage term affects the balance between stability and flexibility. A 5-year fixed term provides long-term protection from rate fluctuations, offering stability throughout the term.
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.
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.
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.
There is technically no limit to how many times you can refinance your home. If you meet the lender's qualifications and it makes financial sense for your situation, you can refinance as often as you wish. However, just because you have the option to refinance multiple times doesn't mean it's always a wise choice.
In fact, in March, Fed Chair Jerome Powell remarked that interest rates "will not go back down to the very low levels that we saw" during the financial crisis, suggesting that the economy can adapt to a more "neutral" benchmark rate range of between 2.4% to 3.8% in the long run, i.e., less tightening, but not too much ...
Ben Eisen: It's the seller basically transferring their own mortgage to the buyer, and when they do that, the buyer keeps the rate that the seller had, so if it was 3% or 2.5%, they keep that.
Generally, what's considered a bad interest rate is anything higher than 10%. Ideally, you want to get an interest rate that's below 5% — but with little or bad credit, that can be harder to achieve.
Forecasters believe mortgage rates may fall further in 2024, meaning it may be wise to opt for a variable rate or tracker mortgage for the time being, and fixing your mortgage once rates do slide. For a more accurate steer, it's a good idea to engage a mortgage advisor when you're ready to choose a mortgage.
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%).
The benchmark interest rate in the United States was last recorded at 4.50 percent. Interest Rate in the United States averaged 5.42 percent from 1971 until 2024, reaching an all time high of 20.00 percent in March of 1980 and a record low of 0.25 percent in December of 2008.
2021: The lowest 30-year mortgage rates ever
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%. That year marked an incredibly appealing homeownership opportunity for first-time homebuyers to enter the housing market.
The fed funds rate has never been as high as it was in the 1980s. The main reason is because the Fed wanted to combat inflation, which soared in 1980 to its highest level on record: 14.6 percent.