In our 2025 mortgage forecast, experts outlined a rough range between 5% and 7% for the average 30-year fixed mortgage. Most housing market forecasts predict rates landing around 6.4% at the end of the year.
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%.
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 bottom line. Predicting exactly when mortgage rates will hit 5% is difficult. It could happen by late 2025, but market conditions could speed up or delay this timeline. "Some consumers feel rates will drop in the next two to four months [but] that may never happen," says Rathbun.
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.
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.
However, without a major downturn or global catastrophe, it's highly unlikely that mortgage rates will drop to their 2020-21 levels. In fact, many economists and housing market experts hope they don't. In the long term, mortgage rates may stabilize between 5.5% and 6%, which is a historically normal range.
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%.
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.
Freddie Mac: In their December outlook, Freddie Mac researchers said they believe mortgage rates will go down "very gradually" in 2025. The Mortgage Bankers Association: The MBA sees mortgage rates trending down throughout 2025. The group thinks rates could end 2025 at 6.40% and tick down to 6.30% in 2026.
According to economic projections released after the meeting, officials expect to cut rates just twice in 2025 — down from four times in their earlier projections — and the minutes show that even those cuts are not guaranteed.
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.
The Mortgage Bankers Association (MBA) in its 2025 finance forecast indicates that mortgage rates will gradually slide from 6.6% at the beginning of 2025 to 6.3% through 2026. The National Association of Home Builders is forecasting 6.12% in 2025 and 5.71% in 2026.
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.
The current Bank of America, N.A. prime rate is 7.50% (rate effective as of December 19, 2024).
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.
1981: The all-time high for mortgage rates
The average mortgage rate in 1981 was 16.63 percent. And that's just the average — some people paid more. For the week of Oct. 9, 1981, mortgage rates averaged 18.63%, the highest weekly rate on record, and almost five times the 2019 annual rate.
The lowest mortgage rate we've ever seen is in recent memory. During the COVID-19 pandemic in 2020 and 2021, average 30-year fixed mortgage rates dropped to 2.65%, according to Freddie Mac data. That's the lowest average rate for a 30-year mortgage term since rates started being tracked in the early 1970s.
Broadly speaking, the market is projecting that short-term interest rates will end 2024 at close to 4% and then be in the region of 3% in December 2025. Should the Fed be more or less aggressive in cutting interest rates than those implicit estimates, then the mortgage rate may move down, or up, respectively.
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%.
While rates are going up at the moment, there is a fair chance they will come down again, especially if demand for mortgages slows." Nicholas Mendes, John Charcol: "By the end of 2024, we expect rates to settle, though the possibility of a return to sub-4% levels will depend on revised market conditions.
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.
However, nearly every economic forecast is predicting lower rates in 2024. The Mortgage Bankers Association's Mortgage Finance Forecast for September 2023 predicts 30-year fixed mortgage rates will be in the 5% range for most of 2024: Q1: 6.1% Q2: 5.8%
Mortgage rates work differently. Their movements are more closely tied to demand for government bonds. When demand for those increases, mortgage rates tend to fall. But thanks to strong economic growth in the pandemic era, demand for those bonds has weakened.