Will Mortgage Rates Go Down in 2025? Mortgage rates may decline this year, but not by much. Analysts expect the 30-year fixed rate to stay in the mid-6% range throughout 2025 and 2026, although the forecast is far from guaranteed.
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.
Some mortgage professionals see the potential for a gradual decline in mortgage rates this year, while others warn that current rates might be here to stay. Chris Heller, president of Movoto.com, believes a drop below 6% is possible, though he emphasizes it won't happen overnight.
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.
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%.
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 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%.
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.
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.
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.
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.
Creditors must reduce the interest rate on debts to 6% for liabilities incurred before you enter active duty. If the debt is a mortgage, the reduced rate extends for one year after active military service.
There is no federally mandated maximum interest rate for credit cards. For credit cards, the CARD Act offers various protections and provides more transparency when it comes to rates.
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.
Mortgage rates have tended to fall in response to recent recessions.
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.
Key takeaways. Looking at the past four decades, the average rate on a 30-year fixed mortgage peaked in 1981, rising just above 16 percent. The average 30-year fixed rate bottomed in 2021 at just under 3 percent.
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.
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.
As it stands right now, the general consensus is for mortgage rates to be in the 5-6% range for 2024.