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%.
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.
Real-estate company Bright MLS expects the 30-year mortgage rate to average 6.4% in 2025, and fall to 6.25% by the end of 2025, according to a forecast released Wednesday. As long as the U.S. economy is strong, rates are expected to stay over 6%.
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%.
Mortgage rates dropped for the third consecutive week after fresh economic data kept expectations about the Federal Reserve's next interest rate cut intact. The average 30-year mortgage rate fell to 6.6% in the week through Wednesday, compared with 6.69% a week earlier, according to Freddie Mac data.
"While I'd love to say rates will drop below 6% in 2025, I think it's a moderate probability and not a certainty," says Steven Parangi, a licensed mortgage loan originator and owner of Alpine Mortgage Services.
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.
Mortgage rates dropped this week after four weeks of increases. Mortgage rates ticked down slightly this week, a tiny boon to buyers eager to make a move with newly listed homes coming to market.
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.
Mortgage rates have tended to fall in response to recent recessions.
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.
Will Mortgage Rates Ever Go Down to 3% Again? While it's possible that interest rates can return to 3% territory in the future, it's highly unlikely that it'll happen anytime soon. In fact, some experts say it may take decades for mortgage rates to return to the levels homebuyers enjoyed just a few years ago.
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%.
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.
What happens if you lock in a mortgage rate and it goes down? If you're locked in and mortgage rates fall, you'll be stuck paying the higher rate unless your rate lock includes a float-down option. A float-down option lets you honor your locked-in rate or the current rate, whichever is lower.
•
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.
The Bottom Line. No one likes high interest rates, but they're not the end of the world. This is still a great time to buy a house—you'll just pay more than you would've a few years ago. It's also a good time to sell a house.
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.
You can often secure better rates with a larger down payment, but you also need to understand how much you can afford. Paying too little for your down payment might cost more over time, while paying too much may drain your savings. A lender will look at your down payment and determine which mortgage is best.
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%
Mortgage rates averaged 6.6% for 30-year, fixed-rate loans in the week ending Dec. 12, according to the latest Freddie Mac data. The financial markets expect the Fed will only lower rates twice in 2025. This is likely to push mortgage rates down, at least a little.